<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
__________________________________
SCHEDULE 13E-3
Amendment No. 1
RULE 13E-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934 and
Rule 13e-3 ((S)240.13e-3) thereunder)
Petroleum Heat and Power Co., Inc.
(Name of Issuer)
Petroleum Heat and Power Co., Inc.
Star Gas Partners, L.P.
Star Gas Corporation
(Name(s) of Person(s) Filing Statement)
-----------------------------------------
Class A Common Stock, par value $.10 per share
(Title of Class of Securities)
-----------------------------------------
716600 309
(Cusip Number of Class of Securities)
-----------------------------------------
Joseph P. Cavanaugh Irik P. Sevin
President Chairman of the Board and
Star Gas Corporation Chief Executive Officer
2187 Atlantic Street Petroleum Heat and Power Co., Inc.
P.O. Box 120011 2187 Atlantic Street
Stamford, Connecticut 06912-0011 Stamford, Connecticut 06902
(Name, Address and Telephone Number of Persons Authorized
to Receive Notices and Communications on Behalf of Person(s)
Filing Statement)
------------------------------------------------------------
With Copies To:
Michael Rosenwasser, Esq. Alan Shapiro, Esq. R. Joel Swanson, Esq.
Andrews & Kurth, L.L.P. Phillips Nizer Benjamin Baker & Botts, L.L.P.
805 Third Avenue Krim & Ballon LLP One Shell Plaza
New York, NY 10022 666 Fifth Avenue 910 Louisiana
(212) 850-2800 New York, NY 10103-0084 Houston, TX 77002-4995
(212) 977-9700 (713) 229-1300
<PAGE>
This statement is filed in connection with (check the appropriate box):
a. [X] The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the
Securities Exchange Act of 1934.
b. [X] The filing of a registration statement under the Securities Act of
1933.
c. [_] A tender offer.
d. [_] None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: [X]
Calculation of Filing Fee
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Transaction Valuation* Amount of Filing Fee
- ------------------------------------------------------------------------------
<S> <C>
$26,148,106.30 $5,230
</TABLE>
* Calculated by multiplying $0.9844, by 26,562,481, the sum of the number of
shares of Common Stock to be converted in the Transaction.
[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: $9,825
Form or Registration No.: Registration Statement on Form S-4;
SEC File No. 333-66005
Filing Party: Star Gas Partners, L.P.
Date Filed: October 22, 1998
<PAGE>
INTRODUCTION
This Rule 13e-3 Transaction Statement on Schedule 13E-3 (the "Schedule 13E-
3") is being filed by (1) Petroleum Heat and Power Co., Inc, a Minnesota
corporation (the "Issuer"); (2) Star Gas Partners, L.P., a Delaware limited
partnership and an indirect subsidiary of the Issuer (the "Partnership"); and
(3) Star Gas Corporation, a Delaware corporation and a wholly-owned subsidiary
of the Issuer ("Star Gas") and the general partner of the Partnership, pursuant
to Section 13(e) of the Securities Exchange Act of 1934, as amended, and Rule
13e-3 thereunder, in connection with a transaction (the "Transaction")
consisting of (a) the merger of a wholly-owned indirect subsidiary of the
Partnership ("Mergeco"), with and into the Issuer (the "Merger"), with the
Issuer surviving the Merger as an indirect wholly-owned subsidiary of the
Partnership, and the conversion of each outstanding share of Class A and Class C
common stock, par value $.10 per share of the Issuer, (the "Common Stock"), into
senior subordinated units of limited partner interest ("Senior Subordinated
Units") of the Partnership, upon the terms and subject to the conditions set
forth in a certain Agreement and Plan of Merger dated as of October 22, 1998
(the "Merger Agreement") among the Issuer, the Partnership and Mergeco, et al.,
a copy of which is filed as Exhibit (c)(1) hereto; and (b) the exchange (the
"Exchange") (1) by certain holders of shares of Common Stock of the Issuer that
are affiliates of the Issuer (the "LLC Owners") with (A) Star Gas LLC, a
Delaware limited liability company, of a portion of the Common Stock (the "LLC
Shares") held by the LLC Owners for 100% of the limited liability company
interests in Star Gas LLC (which in turn will exchange the LLC Shares with the
Partnership for General Partner Units) and (B) with the Partnership, of their
remaining shares of Common Stock held by the LLC Owners, for junior subordinated
units of limited partner interest ("Junior Subordinated Units") of the
Partnership, and (2) by certain other holders of Common Stock, that are
affiliates of the Issuer with the Partnership, of their Common Stock for Senior
Subordinated Units, upon the terms and subject to the conditions set forth in a
certain exchange agreement dated October 22, 1998 (the "Exchange Agreement")
among the Issuer, the Partnership, the LLC Owners and the other affiliated
holders of Common Stock referred to above, a copy of which is filed as Exhibit
(c) (2) hereto.
The following Cross Reference Sheet, prepared pursuant to General
Instruction F to Schedule 13E-3, shows the location in the joint proxy statement
and prospectus of the Partnership (the "Proxy Statement"), included in the
registration statement on Form S-4 (the "S-4") filed by the Partnership with the
Securities and Exchange Commission on the date hereof, of the information
required to be included in this Schedule 13E-3. The information set forth in
the S-4, including all exhibits thereto and the Annual Report on Form 10-K of
the Issuer for its fiscal year ended December 31, 1997 (the "Petro 10-K"), the
Proxy Statement of the Issuer for its 1998 annual meeting of shareholders (the
"Petro Annual Meeting Proxy Statement") and the Annual Report on Form 10-K of
the Partnership for its fiscal year ended September 30, 1997 (the "Partnership
10-K") are hereby expressly incorporated herein by reference as set forth in the
Cross Reference Sheet and the responses in this Schedule 13E-3, and such
responses are qualified in their entirety by reference to the information
contained in the Proxy Statement, the
2
<PAGE>
annexes thereto, the Petro 10-K, the Petro Annual Meeting Proxy Statement and
the Partnership 10-K which are incorporated by reference in and/or accompany the
Proxy Statement.
The information contained in this Schedule 13E-3 concerning the Issuer,
including, without limitation, the information concerning the background of the
Transaction, the deliberations of the Issuer's Board of Directors in connection
with the Transaction, the opinion of the Issuer's financial advisor and the
Issuer's capital structure and historical financial statements of the Issuer,
was supplied by the Issuer. The Partnership and Star Gas take no responsibility
for the accuracy or completeness of such information.
The information contained in this Schedule 13E-3 concerning the
Partnership, including, without limitation, the information concerning the
background of the Transaction, the opinion of the financial advisor to the
special committee (the "Special Committee") of the board of directors of Star
Gas, the Partnership's capital structure and historical financial statements of
the Partnership, was supplied by Star Gas, on behalf of the Partnership. Petro
takes no responsibility for the accuracy or completeness of such information.
3
<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Item in Where Located in
Schedule 13E-3 Proxy Statement
- -------------- ----------------
<S> <C>
Item 1(a)............................. Cover Page, "Proxy Statement Summary
- Parties - Petro" and "Parties and
Conflicts - Parties to the Transaction
- Petro"
Item 1(b)............................. Cover Page, "Proxy Solicitations - The
Special Meeting - Petro Record Date,"
"Proxy Solicitations - The Special
Meeting - Voting Rights; Vote Required"
and "Proxy Solicitations - The Special
Meeting - Petro Preferred Stock"
Items 1(c) and (d).................... "Comparative Security Price and
Distribution Information - Petro Capital
Stock -Class A Common Stock,"
"Comparison of Securities -
Distributions and Dividends" and
"Incorporation of Certain Documents by
Reference"
Item 1(e)............................. *
Item 1(f)............................. *
Items 2(a) - (d) and (g).............. Cover Page, "Proxy Statement Summary
- Parties," "Parties and Conflicts -
Parties to the Transaction," "Management
of the Partnership After the Transaction
- Officers and Employees of the Operating
Partnership and Petro," "Beneficial Ownership
of Principal Unitholders and Management"
and "Incorporation of Certain Documents by
Reference"
Items 2(e) and (f).................... *
Items 3(a) and (b).................... "Proxy Statement Summary - The
Transaction," "Proxy Statement Summary - The
Transaction - The Merger and the Exchange,"
"The Transaction - Description of the Transaction,"
"The Transaction -
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Description of the Merger and the
Exchange," "Special Factors -
Background of the Transaction,"
"Management of the Partnership After the
Transaction" and "Incorporation of
Certain Documents by Reference"
Item 4(a) and (b)..................... Cover Page, "Proxy Statement Summary -
The Transaction," "Proxy Statement
Summary - The Transaction -
The Merger and the Exchange,"
"The Transaction - Description of the
Transaction," "The Transaction -
Description of the Merger and the
Exchange" and "The Transaction -
Description of the Merger Agreement"
Items 5(a) - (g)...................... "Proxy Statement Summary - The Transaction,"
"Proxy Statement Summary - The Transaction -
The Merger and the Exchange," "The
Transaction - Description of the Transaction,"
"The Transaction - Description of the Merger
and the Exchange" and "The Transaction -
Description of the Merger Agreement"
Item 6(a)............................. "Proxy Statement Summary - The
Transaction - Financings and
Refinancings," "Proxy Statement
Summary - Financial Information -
Estimated Sources and Uses of Funds of
the Equity Offering and Debt Offering"
and "The Transaction - Related
Financing and Refinancing Transactions"
Item 6(b)............................. "Proxy Statement Summary - Financial
Information - Estimated Sources and Uses
of Funds of the Equity Offering and Debt
Offering," "Proxy Solicitations - The
Unitholders Meeting - Cost of
Solicitation of Proxies," "Proxy
Solicitation - The Special Meeting -
Cost of Solicitation of Proxies,"
"Special Factors - Opinion of A.G.
Edwards - Terms of A.G. Edwards'
Engagement," "Special Factors - Opinion
of Dain Rauscher Wessels - Dain Rauscher
Wessels' Engagement Agreement" and "The
Transaction - Description of the Merger
Agreement - Expenses"
Item 6(c)............................. "Proxy Statement Summary - The
Transaction - Related Financings and
Refinancings" and "The
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Transaction - Related Financing and
Refinancing Transactions"
Item 6(d)............................. *
Item 7(a)............................. "Proxy Statement Summary - Special
Factors - Potential Advantages to the
Common Stockholders," "Proxy Statement
Summary - Special Factors -
Recommendations of Petro Board of
Directors and Opinion of Dain Rauscher
Wessels," "Proxy Statement Summary -
Description of the Partnership Units,"
"Special Factors - Background of the
Transaction," "Special Factors - Reasons
for the Transaction that the Petro
Board Considered; Recommendation of
the Petro Board," "Cash Available for
Distribution" and "Description of the
Units"
Items 7(b) and (c).................... "Proxy Statement Summary - The
Transaction" and "The Transaction -
Background of the Transaction"
Item 7(d)............................. "Proxy Statement Summary - Special
Factors - Potential Advantages to the
Common Stockholders," "Proxy Statement
Summary - Special Factors - Potential
Disadvantages and Risks to the Common
Stockholders," "Proxy Statement
Summary - Financial Information -
Summary Selected Unaudited Pro Forma
Condensed Consolidated Financial
Information," "Risk Factors - Risks to
Common Stockholders," "Risk Factors -
Tax Risks to Common Stockholders,"
"Parties and Conflicts - Conflicts of
Interest - Certain Persons Have
Interests in the Transaction that
Conflict, or May be Perceived to
Conflict, with the Interests of Common
Stockholders and Common Unitholders,"
"Special Factors - Reasons for the
Transaction that the Petro Board
Considered; Recommendation of the Petro
Board,"
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
"Management of the Partnership After
the Transaction," "The Amended and
Restated Partnership Agreement,"
"Cash Distribution Policy," "Cash
Available for Distribution,"
"Description of the Units,"
"Comparison of Securities" and
"Certain Federal Income Tax
Considerations"
Items 8(a) - (e)...................... Cover Page, "Proxy Statement Summary -
Special Factors - Recommendations of
Petro Board of Directors and Opinion of
Dain Rauscher Wessels," "Proxy
Solicitations - The Special Meeting -
Petro Board Recommendation," "Proxy
Solicitations - The Special Meeting -
Voting Rights; Vote Required," "Special
Factors - Background of the
Transaction," "Special Factors -
Reasons for the Transaction that the
Petro Board Considered; Recommendation
of the Petro Board" and "Special
Factors - Opinion of Dain Rauscher
Wessels"
Item 8(f)............................. *
Items 9(a) - (c)...................... "Proxy Statement Summary - Special
Factors - Recommendation of Petro Board
of Directors and Opinion of Dain
Rauscher Wessels," "Special Factors -
Background of the Transaction - Petro
Retains Dain Rauscher Wessels to Provide
a Fairness Opinion to Petro's Public
Common Stockholders" and "Special
Factors - Opinion of Dain Rauscher
Wessels"
Items 10(a)........................... "Proxy Solicitations - The Special
Meeting - Voting Rights; Vote Required"
Item 10(b)............................ *
Item 11............................... "Proxy Statement Summary - The
Transaction,"
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
"Proxy Statement Summary - The
Transaction - The Merger and the
Exchange," "Proxy Statement Summary -
The Transaction - Financings and
Refinancings," "The
Transaction - Description of the
Transaction," "The Transaction -
Description of the Merger and the
Exchange," "The Transaction - Related
Financing and Refinancing Transactions"
and "Parties and Conflicts - Conflicts
of Interest - Certain Persons Have
Interests in the Transaction that
Conflict, or May be Perceived to
Conflict, with the Interests of Common
Stockholders and Common Unitholders"
Items 12(a) and (b)................... "Proxy Statement Summary - Special
Factors - Recommendation of Petro Board of
Directors and Opinion of Dain Rauscher
Wessels," "Proxy Solicitations - The
Special Meeting - Petro Board
Recommendation," "Proxy Solicitations -
The Special Meeting - Voting Rights;
Vote Required" and "Special Factors -
Reasons for the Transaction that the
Petro Board Considered; Recommendation
of the Petro Board"
Item 13(a)............................ "Proxy Solicitations - The Special Meeting
- Dissenters' Rights," "Dissenters' Rights,"
and Annex F to the Proxy Statement
Item 13(b)............................ *
Item 13(c)............................ *
Item 14(a) and (b).................... "Proxy Statement Summary - Financial
Information - Summary Selected
Historical Financial and Operating Data
of Petro," "Proxy Statement Summary -
Financial Information - Summary Selected
Unaudited Pro Forma Condensed
Consolidated Financial Information,"
"Comparative Security Price and
Distribution Information - Comparative
Per Share/Per Unit Information
(Unaudited)," "Unaudited Pro Forma
Condensed Consolidated Financial
Information" and "Incorporation of
Certain Documents by Reference"
Item 14(b)............................ *
Item 15(a)............................ "Proxy Statement Summary - The
Transaction," "Proxy Statement
Summary - The Transaction - Financings
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
and Refinancings, "Proxy Statement
Summary - Financial Information -
Estimated Sources and Uses of Funds of
the Equity Offering and Debt Offering,"
"Proxy Solicitations - The Unitholders
Meeting - Cost of Solicitation of
Proxies," "Proxy Solicitations - The
Special Meeting - Cost of Solicitation
of Proxies," "The Transaction - Related
Financing and Refinancing Transactions -
Public Offerings" and "The Transaction -
Description of the Merger Agreement -
Expenses"
Item 15(b)............................ "Proxy Solicitations - The Unitholders
Meeting - Cost of Solicitation of
Proxies," "Proxy Solicitations - The
Special Meeting - Cost of Solicitation
of Proxies," "Special Factors - Opinion
of A.G. Edwards - Terms of A.G. Edwards'
Engagement" and "Special Factors -
Opinion of Dain Rauscher Wessels - Dain
Rauscher Wessels' Engagement Agreement"
Item 16............................... The Proxy Statement in its entirety
Item 17............................... *
- --------------------
</TABLE>
* The Item is located in the Schedule 13E-3 only.
9
<PAGE>
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The relevant information set forth in the Proxy Statement on the cover
page thereof and under "Proxy Statement Summary - Parties - Petro" and "Parties
and Conflicts - Parties to the Transaction - Petro" is incorporated herein by
reference.
(b) The information set forth in the Proxy Statement on the cover page
thereof and under "Proxy Solicitations - The Special Meeting - Petro Record
Date," "Proxy Solicitations - The Special Meeting - Voting Rights; Vote
Required" and "Proxy Solicitations - The Special Meeting - Petro Preferred
Stock" is incorporated herein by reference.
(c) and (d) The relevant information set forth in the Proxy Statement
under "Comparative Security Price and Distribution Information - Petro Capital
Stock -Class A Common Stock," "Comparison of Securities - Distributions and
Dividends" and "Incorporation of Certain Documents by Reference" is incorporated
herein by reference. The information set forth in Item 5, Part II of the Petro
10-K under the heading "Market for Registrant's Common Equity and Related
Stockholder Matters" is incorporated herein by reference.
(e) On December 22, 1997, the Partnership offered, in an underwritten
public offering registered under the Securities Act, 832,727 of its common units
representing limited partner interests (the "Common Units"), at an offering
price to the public of $21.25 per Common Unit. 809,000 of such Common Units
were offered by the Partnership and 23,727 of such Common Units were offered by
Star Gas as the selling unitholder. The Partnership received net proceeds of
$16,244,720 for 809,000 Common Units sold by the Partnership, and Star Gas
received net proceeds of $2,966.358 for 87,000 Common Units sold by Star Gas
(including 62,273 Common Units sold by Star Gas pursuant to the over-allotment
option to purchase an additional 124,000 Common Units granted to the
underwriters, which was exercised in part on January 7, 1998).
(f) Not Applicable.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Statement is being filed by the Issuer, the
Partnership and Star Gas. The information set forth on the cover page thereof
and under "Proxy Statement Summary - Parties," "Parties and Conflicts - Parties
to the Transaction," "Management of the Partnership After the Transaction -
Officers and Employees of the Operating Partnership and Petro" and "Beneficial
Ownership of Principal Unitholders and Management" and information appearing
under Item 10 of the Petro 10-K and under "Election of Directors" and "Executive
Officers" in the Petro Annual Meeting Proxy Statement and information appearing
under Item 10 of the Partnership 10-K, which information is incorporated by
reference in the Proxy Statement under "Incorporation of Certain Documents by
Reference" and is incorporated herein by reference.
10
<PAGE>
(e) and (f) During the last five years, none of (i) the Issuer, the
Partnership or Star Gas or, (ii) to the best knowledge of the Issuer, the
Partnership and Star Gas, any person who is a director or executive officer of
the Issuer, the Partnership or Star Gas has been (i) convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting activities
subject to, federal or state securities laws or finding any violation of such
laws. The Partnership and the Operating Partnership do not have any officers,
directors or employees.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a) and (b) The relevant information set forth in the Proxy Statement
under "Proxy Statement Summary - The Transaction," "Proxy Statement Summary -
The Merger and the Exchange" and "Proxy Statement Summary - Partnership
Structure and Management Following the Transaction," "The Transaction -
Description of the Transaction," "The Transaction - Description of the Merger
and the Exchange," "The Transaction - Background of and Reasons for the
Transaction- Background of the Transaction" and "Management of the Partnership
After the Transaction" and information appearing under Item 13 of the Petro 10-K
and under "Election of Directors - Certain Transactions" in the Petro Annual
Meeting Proxy Statement and information appearing in Note 16 (Related Party
Transactions) to the Consolidated Financial Statements of the Partnership and
its subsidiary included in the Partnership 10-K, which information is
incorporated by reference in the Proxy Statement under "Incorporation of Certain
Documents" and is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) and (b) The information set forth in the Proxy Statement on the cover
page thereof and under "Proxy Statement Summary - The Transaction," "Proxy
Statement Summary - The Transaction - The Merger and the Exchange," "The
Transaction - Description of the Transaction," "The Transaction - Description of
the Merger and the Exchange" and "The Transaction - Description of the Merger
Agreement" is incorporated herein by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(g) The information set forth in the Proxy Statement under "Proxy
Statement Summary - The Transaction," "Proxy Statement Summary - The Merger and
the Exchange," "The Transaction - Description of the Transaction," "The
Transaction - Description of the Merger and the Exchange" and "The Transaction -
Description of the Merger Agreement" is incorporated herein by reference.
11
<PAGE>
ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in the Proxy Statement under "Proxy Statement
Summary - Financings and Refinancings, "Proxy Statement Summary - Financial
Information - Estimated Sources and Uses of Funds of the Equity Offering and
Debt Offering" and "The Transaction - Related Financing and Refinancing
Transactions" is incorporated herein by reference.
(b) The information set forth in the Proxy Statement under "Proxy Statement
Summary - Financial Information - Estimated Sources and Uses of Funds of the
Equity Offering and Debt Offering," "Proxy Solicitations - The Unitholders
Meeting - Cost of Solicitation of Proxies," "Proxy Solicitations - The Special
Meeting - Cost of Solicitation of Proxies," "Special Factors - Opinion of A.G.
Edwards - Terms of A.G. Edwards' Engagement," "Special Factors - Opinion of Dain
Rauscher Wessels - Dain Rauscher Wessels' Engagement Agreement" and "The
Transaction - Description of the Merger Agreement - Expenses" is incorporated
herein by reference.
(c) The information set forth in the Proxy Statement under "Proxy Statement
Summary - Financings and Refinancings" and "The Transaction - Related Financing
and Refinancing Transactions" is incorporated herein by reference.
(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a) The information set forth in the Proxy Statement under "Proxy Statement
Summary - Special Factors - Potential Advantages to the Common Stockholders,"
"Proxy Statement Summary - Special Factors - Recommendations of Petro Board of
Directors and Opinion of Dain Rauscher Wessels," "Proxy Statement Summary -
Description of the Partnership Units," "Special Factors - Background of the
Transaction," "Special Factors - Reasons for the Transaction that the Petro
Board Considered; Recommendation of the Petro Board," "Cash Available for
Distribution" and "Description of the Units" is incorporated herein by
reference.
(b) and (c) The information set forth in the Proxy Statement under "Proxy
Statement Summary - The Transaction" and "Special Factors - Background of the
Transaction" is incorporated herein by reference.
(d) The information set forth in the Proxy Statement "Proxy Statement
Summary - Special Factors - Potential Advantages to the Common Stockholders,"
"Proxy Statement Summary - Special Factors - Potential Disadvantages and Risks
to the Common Stockholders," "Proxy Statement Summary - Financial Information -
Summary Selected Unaudited Pro Forma Condensed Consolidated Financial
Information," "Risk Factors - Risks to Common Stockholders," "Risk Factors - Tax
Risks to Common Stockholders," "Parties and Conflicts - Conflicts of Interest -
Certain Persons Have Interest in the Transaction that Conflict, or May be
Perceived to Conflict, with the Interests of Common Stockholders and Common
Unitholders,"
12
<PAGE>
"Special Factors - Reasons for the Transaction that the Petro Board Considered;
Recommendation of the Petro Board," "Management of the Partnership After the
Transaction," "The Amended and Restated Partnership Agreement," "Cash
Distribution Policy," "Cash Available for Distribution," "Description of the
Units," "Comparison of Securities" and "Certain Federal Income Tax
Considerations" is incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a) - (e) The information set forth in the Proxy Statement on the cover
page thereof and under "Proxy Statement Summary - Special Factors -
Recommendation of Petro Board of Directors and Opinion of Dain Rauscher
Wessels," "Parties and Conflicts - Conflicts of Interests - Certain Persons Have
Interests in the Transaction that Conflict, or May be Perceived to Conflict,
with the Interests of the Common Stockholders and Common Unitholders," "Proxy
Solicitations - The Special Meeting - Petro Board Recommendation," "Proxy
Solicitations - The Special Meeting - Voting Rights; Vote Required" "Special
Factors - Background of the Transaction," "Special Factors - Reason for the
Transaction that the Petro Board Considered; Recommendations of the Petro
Board," and "Special Factors - Opinion of Dain Rauscher Wessels" is incorporated
herein by reference.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a) - (c) The information set forth in the Proxy Statement under "Proxy
Statement Summary - Special Factors - Recommendation of Petro Board of Directors
and Opinion of Dain Rauscher Wessels," "Special Factors - Background of the
Transaction - Petro Retains Dain Rauscher Wessels to Provide a Fairness Opinion
to Petro's Public Common Stockholders" and "Special Factors - Opinion of Dain
Rauscher Wessels" is incorporated herein by reference. The opinion of Dain
Rauscher Wessels is attached to the Proxy Statement as Annex E.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The information set forth in the Proxy Statement under "Proxy
Solicitations - The Special Meeting - Voting Rights; Vote Required" and the
information set forth in the Petro Annual Meeting Proxy Statement under
"Ownership of Equity Securities" is incorporated herein by reference.
(b) Not applicable.
13
<PAGE>
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES PROXY STATEMENT - SUMMARY - THE TRANSACTION.
The information set forth in the Proxy Statement under "Proxy Statement
Summary - The Transaction," "Proxy Statement Summary - The Transaction - The
Merger and the Exchange," "Proxy Statement Summary - The Transaction -Financings
and Refinancings," "The Transaction - Description of the Transaction," "The
Transaction - Description of the Merger and the Exchange," "Parties and
Conflicts - Conflicts of Interest - Certain Persons Have Interests in the
Transaction that Conflict, or May be Perceived to Conflict, with the Interests
of Common Stockholders and Common Unitholders," and "The Transaction - Related
Financing and Refinancing Transactions" is incorporated herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
(a) and (b) The information set forth in the Proxy Statement under "Proxy
Statement Summary - Special Factors - Recommendation of Petro Board of Directors
and Opinion of Dain Rauscher Wessels," "Proxy Solicitations - The Special
Meeting - Petro Board Recommendation," "Proxy Solicitations - The Special
Meeting - Voting Rights; Vote Required" and "Special Factors - Reasons for the
Transaction that the Petro Board Considered; Recommendation of the Petro Board"
is incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in the Proxy Statement under "Proxy
Solicitations - The Special Meeting - Dissenters' Rights," "Dissenters' Rights,"
and Annex F to the Proxy Statement is incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) The information set forth in the Proxy Statement under "Proxy Statement
Summary - Financial Information - Summary Selected Historical Financial and
Operating Data of Petro," "Proxy Statement Summary - Financial Information -
Summary Selected Unaudited Pro Forma Condensed Consolidated Financial
Information," "Comparative Security Price and Distribution Information-
Comparative Per Share/Per Unit Information (Unaudited)" and "Unaudited Pro Forma
Condensed Consolidated Financial Information" is incorporated herein by
reference. The consolidated financial statements of Petro and its subsidiaries
included in the Petro 10 - K have been incorporated by reference in the Proxy
Statement under "Incorporation of Certain Documents by Reference" are
incorporated herein by reference.
14
<PAGE>
(b) Not applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) The relevant information set forth under "Proxy Statement Summary - The
Transaction," "Proxy Statement Summary - The Transaction - Financings
and Refinancings," "Proxy Statement Summary - Financial Information - Estimated
Sources and Uses of Funds of the Equity Offering and Debt Offering," "Proxy
Solicitations - The Unitholders Meeting - Cost of Solicitation of Proxies,"
"Proxy Solicitations - The Special Meeting - Cost of Solicitation of Proxies,"
"The Transaction - Related Financing and Refinancing Transactions - Public
Offerings" and "The Transaction - Description of the Merger Agreement -
Expenses" is incorporated herein by reference.
(b) The relevant information set forth under "Proxy Solicitations - The
Unitholders Meeting - Cost of Solicitation of Proxies," " Proxy Solicitations
The Special Meeting - Cost of Solicitation of Proxies," "Special Factors -
Opinion of A.G. Edwards - Terms of A.G. Edwards' Engagement" and "Special
Factors - Opinion of Dain Rauscher Wessels - Dain Rauscher Wessels' Engagement
Agreement" is incorporated herein by reference.
ITEM 16. ADDITIONAL INFORMATION.
The information set forth in the Proxy Statement, a copy of which is filed
as Exhibit (d)(l) hereto, is incorporated herein by reference.
15
<PAGE>
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a) Loan Agreements referred to in Item 6.**
(b)(1) Opinion of Dain, Rauscher Wessels, dated October 22, 1998 (attached
as Annex E to the Proxy Statement).**
(b)(2) Dain Rauscher Wessels' Presentation to the Issuer's Board of
Directors.*
(b)(3) PaineWebber Incorporated's Presentations to the Issuer's Board of
Directors.*
(b)(4) Opinion of A. G. Edwards, dated October 16, 1998 (attached as Annex
D to the Proxy Statement).**
(b)(5) A. G. Edwards' Preliminary Report to Star Gas' Special Committee
dated April 28, 1998.*
(b)(6) A. G. Edwards' Appendices to Preliminary Report to Star Gas'
Special Committee dated April 28, 1998.*
(b)(7) A. G. Edwards' Preliminary Status Report to the Partnership's
Board of Directors draft dated May 4, 1998.*
(b)(8) A. G. Edwards' Round II Appendices to Preliminary Report to the
Special Committee-Analyses Performed at $2.00 per share dated
May 4, 1998.*
(b)(9) A. G. Edwards' Round II Appendices to Preliminary Report to the
Special Committee-Analyses Performed at $2.50 per share dated
May 4, 1998.*
(b)(10) A. G. Edwards' Preliminary Status Report to the Partnership's
Board of Directors dated May 7, 1998.*
(b)(11) A. G. Edwards' Proposal to Star Gas' Special Committee draft
dated May 20, 1998.*
(b)(12) A. G. Edwards' Round III Update to Preliminary Report to Star
Gas' Special Committee dated May 21, 1998.*
(b)(13) A. G. Edwards' Round III Appendices to Preliminary Report to
Star Gas' Special Committee-Analyses Performed at $2.50 per
share plus issuances of DPUs dated May 21, 1998.*
(b)(14) A. G. Edwards' Revised Proposal to Star Gas' Special Committee
draft dated May 26, 1998.*
(b)(15) A. G. Edwards' Revised Proposal to Star Gas' Special Committee
draft dated July 28, 1998.*
(b)(16) A. G. Edwards' Fairness Opinion Presentation to Star Gas' Special
Committee dated October 16, 1998.*
(b)(17) A. G. Edwards' Appendix I to Fairness Opinion Presentation to
Star Gas' Special Committee dated October 16, 1998.*
(b)(18) A. G. Edwards' Appendix II to Fairness Opinion Presentation to
Star Gas' Special Committee dated October 16, 1998.*
(c)(1) Agreement and Plan of Merger dated October 22, 1998, among Issuer,
the Partnership, the Operating Partnership, and Mergeco and the
Company (attached as Annex A to the Proxy Statement).**
(c)(2) Exchange Agreement dated October 22, 1998 among the Partnership and
certain affiliated Common Stockholders of Petro (attached as Annex
B to the Proxy Statement).**
(d)(l) Preliminary Proxy Statement/Prospectus dated December 22, 1998.**
(d)(2) Form of Letter of Transmittal to holders of Petro Common Stock .**
(d)(3) Form of Notice of Special Meeting.**
(d)(4) Press Release issued by Parent on August 14, 1998.*
(e) Section 302A-471 and 302A-473 of the Minnesota Business Corporation
Act (attached as Annex F to the Proxy Statement).***
(f) Not applicable.
- - - - - - - -
* Filed herewith.
** Incorporated by reference to the Registration Statement on Form S-4 filed
by the Issuer with the Securities and Exchange Commission on October 22,
1998.
*** Filed on October 22, 1998.
16
<PAGE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief, each of the
undersigned hereby certifies that the information set forth in this statement is
true, complete and correct.
December 23, 1998.
PETROLEUM HEAT AND POWER CO., INC.
By: /s/ Irik P. Sevin
------------------------------------
Name: Irik P. Sevin
Title: Chairman of the Board and Chief
Executive Officer
STAR GAS PARTNERS, L.P.
By: Star Gas Corporation
------------------------------------
its General Partner
By: /s/ Joseph P. Cavanaugh
------------------------------------
Name: Joseph P. Cavanaugh
Title: President
STAR GAS CORPORATION
By: /s/ Joseph P. Cavanaugh
------------------------------------
Name: Joseph P. Cavanaugh
Title: President
17
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
(a) Loan Agreements referred to in Item 6.***
(b)(1) Opinion of Dain, Rauscher Wessels, dated October 22, 1998 (attached
as Annex E to the Proxy Statement).**
(b)(2) Dain, Rauscher Wessels' Presentation to the Issuer's Board of
Directors.*
(b)(3) Paine Webber Incorporated's Presentations to the Issuer's Board of
Directors.*
(b)(4) Opinion of A.G. Edwards, dated October 16, 1998 (attached as Annex
D to the Proxy Statement).**
(b)(5) A.G. Edwards' Preliminary Report to Star Gas' Special Committee
dated April 28, 1998.*
(b)(6) A. G. Edwards' Appendices to Preliminary Report to Star Gas'
Special Committee dated April 28, 1998.*
(b)(7) A. G. Edwards' Preliminary Status Report to the Partnership's
Board of Directors draft dated May 4, 1998.*
(b)(8) A. G. Edwards' Round II Appendices to Preliminary Report to the
Special Committee-Analyses Performed at $2.00 per share dated
May 4, 1998.*
(b)(9) A. G. Edwards' Round II Appendices to Preliminary Report to the
Special Committee-Analyses Performed at $2.50 per share dated
May 4, 1998.*
(b)(10) A. G. Edwards' Preliminary Status Report to the Partnership's
Board of Directors dated May 7, 1998.*
(b)(11) A. G. Edwards' Proposal to Star Gas' Special Committee draft
dated May 20, 1998.*
(b)(12) A. G. Edwards' Round III Update to Preliminary Report to Star
Gas' Special Committee dated May 21, 1998.*
(b)(13) A. G. Edwards' Round III Appendices to Preliminary Report to
Star Gas' Special Committee-Analyses Performed at $2.50 per
share plus issuances of DPUs dated May 21, 1998.*
(b)(14) A. G. Edwards' Revised Proposal to Star Gas' Special Committee
draft dated May 26, 1998.*
(b)(15) A. G. Edwards' Revised Proposal to Star Gas' Special Committee
draft dated July 28, 1998.*
(b)(16) A. G. Edwards' Fairness Opinion Presentation to Star Gas' Special
Committee dated October 16, 1998.*
(b)(17) A. G. Edwards' Appendix I to Fairness Opinion Presentation to
Star Gas' Special Committee dated October 16, 1998.*
(b)(18) A. G. Edwards' Appendix II to Fairness Opinion Presentation to
Star Gas' Special Committee dated October 16, 1998.*
(c)(1) Agreement and Plan of Merger dated October 22, 1998, among Issuer,
the Partnership, the Operating Partnership, and Mergeco and the
Company (attached as Annex A to the Proxy Statement).**
(c)(2) Exchange Agreement dated October 22, 1998 among the Partnership and
certain affiliated Common Stockholders of Petro (attached as Annex
B to the Proxy Statement).**
(d)(l) Preliminary Proxy Statement/Prospectus dated December 22, 1998.**
(d)(2) Form of Letter of Transmittal to holders of Petro Common Stock.**
(d)(3) Form of Notice of Special Meeting.**
(d)(4) Press Release issued by Parent on August 14, 1998.*
(e) Section 302A-471 and 302A-473 of the Minnesota Business Corporation
Act (attached as Annex F to the Proxy Statement).***
(f) Not applicable.
- -----------------
* Filed herewith.
** Incorporated by reference to the Registration Statement on Form S-4 filed
by the Issuer with the Securities and Exchange Commission on October 22,
1998.
*** Filed on October 22, 1998.
19
<PAGE>
EXHIBIT 99(b)(2)
[LOGO OF PETRO APPEARS HERE]
Materials Prepared for Discussion
Board of Directors Meeting
October 6, 1998
DAIN RAUSCHER WESSELS
a division of Dain Rauscher Incorporated
<PAGE>
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Table of Contents
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS: SECTION
- ----------------- -------
<S> <C>
Transaction Summary........................................... 1
Pro Forma Analysis............................................ 2
Unit Reference Value Analysis................................. 3
Historical and Pro Forma MVE and MVC Comparison............... 4
Discounted Cash Flow Analysis................................. 5
Relative Contribution Analysis................................ 6
Net Asset Value Analysis...................................... 7
Comparable Company Trading Analysis
Energy and Fuel Marketing and Distribution Companies.......... 8
Propane Master Limited Partnerships........................... 9
Comparable Transactions Analysis.............................. 10
Merger Premiums Analysis...................................... 11
Price and Volume Data......................................... 12
</TABLE>
<PAGE>
LOGO PETRO Project Intense Heat
- --------------------------------------------------------------------------------
Transaction Summary
- --------------------------------------------------------------------------------
Dain Rauscher Wessels Page 1
<PAGE>
LOGO PETRO Transaction Summary
Summary of Proposed Terms
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Summary of Proposed Terms
(In thousands, except as otherwise indicated)
<TABLE>
<CAPTION>
<CAPTION>
Pro Forma Star Units
Historical -------------------------------------------------------------
Petro Common Sr Sub Jr Sub GP
Petro Shareholders (A only) Common Units Units Units Units
- ------------------------------------------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Class A 12,918 -- 1,688 --
Petro Shareholders (excluding A only)
- -------------------------------------------
Class A (to receive Sr Sub Units) 8,258 -- 1,079 --
Class A & C (to receive Jr Sub Units) 5,386 -- -- 578 279
Class B 11 -- -- -- --
--------- ---------- ---------- ---------- ----------
Total Petro Shareholders (excluding A only) 13,655 1,079 578 279
--------- ---------- ---------- ---------- ----------
Total Petro Shareholders 26,573 2,766 578 279
========= ========== ========== ========== ==========
Existing Star Public Unitholders -- 3,832 -- -- --
New Star Units
- -------------------------------------------
Debt and Preferred Stock Exchange -- 104 -- -- --
Public Offering -- 6,375 -- -- --
---------- ---------- ---------- ----------
Pro Forma Star Units Outstanding -- 10,311 2,766 578 279
========== ========== ========== ==========
General Assumptions
- -------------------------------------------
Exchange Ratio (Petro Share / Star Unit) -- -- 0.13064 0.15913 0.15913
Star Historical MQD $2.200
Star Pro Forma MQD $2.300
GP Interest 2.0%
<CAPTION>
Pro Forma Star Units
---------------------------------------------------------------- GP
Total DPUs Total Units Fully-Diluted Incentive
Petro Shareholders (A only) Units (Sr Sub) (incl. DPUs) Ownership Distributions
- ------------------------------------------- ---------- ------------ ------------ ------------ -------------
Class A 1,688 423 2,111 14.2% 46.6%
Petro Shareholders (excluding A only)
- -------------------------------------------
Class A (to receive Sr Sub Units) 1,079 271 1,349 9.1% 29.8%
Class A & C (to receive Jr Sub Units) 857 215 1,072 7.2% 23.7%
Class B -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total Petro Shareholders (excluding A only) 1,936 486 2,422 16.3% 53.4%
---------- ---------- ---------- ---------- ----------
Total Petro Shareholders 3,624 909 4,533 30.5% 100.0%
========== ========== ========== ========== ==========
Existing Star Public Unitholders 3,832 -- 3,832 25.8% --
New Star Units
- -------------------------------------------
Debt and Preferred Stock Exchange 104 -- 104 0.7% --
Public Offering 6,375 -- 6,375 43.0% --
---------- ---------- ---------- ---------- ----------
Pro Forma Star Units Outstanding 13,934 909 14,843 100.0% 100.0%
========== ========== ========== ========== ==========
General Assumptions
- -------------------------------------------
Exchange Ratio (Petro Share / Star Unit) -- -- -- -- --
Star Historical MQD
Star Pro Forma MQD
GP Interest
</TABLE>
DPU Distribution Pro rata distribution of Sr Sub Units based upon Petro pro
forma ownership of total Star Units issued to Petro. Up to
303,000 DPUs can be earned each year if Petro provides
$0.50 per Unit accretion to Star, up to a maximum of
909,000 DPUs.
GP Incentive
Distributions Pro rata distribution based upon Petro pro forma ownership
of total Star Units issued to Petro.
Petro Debt &
Preferred Exchange Petro will issue to holders of certain Petro debt and
preferred stock 3.37 shares of Petro Junior Convertible
Preferred Stock for each $1,000 in principal or
liquidation value. Each share of Petro Junior Convertible
Preferred Stock will be exchangeable into 0.13 Star Common
Units.
- ------------------------------------------------------------------------------
Dain Rauscher Wessels Page 2
<PAGE>
LOGO PETRO Project Intense Heat
- ------------------------------------------------------------------------------
Pro Forma Analysis
- ------------------------------------------------------------------------------
Dain Rauscher Wessels Page 3
<PAGE>
LOGO PETRO Pro Forma Analysis
Petro Summary Historical Financial Data
- --------------------------------------------------------------------------------
PETROLEUM HEAT AND POWER CO., INC.
Summary Historical Financial Data
(In thousands, except as otherwise indicated)
<TABLE>
<CAPTION>
At or for the Year Ended December 31,
------------------------------------------------------------
INCOME STATEMENT DATA 1993 1994 1995 1996
- ------------------------------------------------------ ------------ ------------ ------------ ------------
Net Sales $538,526 $546,677 $609,507 $608,161
Gross Profit (after direct delivery expense) 141,815 150,701 185,048 147,671
EBITDA (1) 48,436 55,387 56,753 42,070
EBITDA (including SGU Distributions) (1) 48,436 55,387 56,753 46,383
EBIT 13,772 22,992 17,710 12,125
Net Income (Loss) before Extraordinary Items (7,564) (3,611) (22,043) (21,901)
Net Income (Loss) (8,431) (4,265) (23,479) (28,315)
Net Income (Loss) to Common (11,798) (7,776) (26,742) (30,704)
Cash Flow (Loss) to Common 25,971 28,905 16,028 8,764
Less: Maintenance Capex (2) 3,000 3,000 3,000 3,000
Free Cash Flow (Loss) 22,971 25,905 13,028 5,764
PER SHARE DATA
- ------------------------------------------------------
Earnings (Loss) per Share before Extra Items ($0.50) ($0.33) ($1.00) ($0.95)
Earnings (Loss) per Share ($0.54) ($0.36) ($1.06) ($1.20)
Cash Flow (Loss) per Share $1.19 $1.32 $0.63 $0.34
Free Cash Flow (Loss) per Share $1.06 $1.18 $0.51 $0.23
Dividends Paid per Share $0.53 $0.55 $0.60 $0.60
Weighted Average Shares Outstanding 21,755 21,897 25,324 25,593
BALANCE SHEET DATA
- ------------------------------------------------------
Working Capital $16,694 $28,345 $65,408 $18,093
Total Assets 256,589 397,174 357,241 275,025
Total Debt (including short-term) 213,344 315,562 341,430 316,384
Preferred Stock (including current maturities) 25,000 20,834 16,667 12,500
Total Stockholders' Equity (Deficiency) (61,964) (66,176) (100,903) (145,733)
Total Capitalization 176,380 270,220 257,194 183,151
FINANCIAL RATIO DATA
- ------------------------------------------------------
Interest Expense $22,156 $25,282 $41,084 $34,669
EBITDA to Interest Expense 2.2 x 2.2 x 1.4 x 1.2 x
EBITDA (including SGU Distributions) to Interest Expense 2.2 x 2.2 x 1.4 x 1.3 x
Total Debt to EBITDA 4.4 x 5.7 x 6.0 x 7.5 x
Total Debt to EBITDA (including SGU Distributions) 4.4 x 5.7 x 6.0 x 6.8 x
Total Debt to Total Capitalization 121.0% 116.8% 132.8% 172.7%
Total Debt & Preferred to Total Capitalization 135.1% 124.5% 139.2% 179.6%
<CAPTION>
At or for the Year Ended December 31, 1997
-------------------------------------------------------------------------
INCOME STATEMENT DATA Q1 Q2 Q3 Q4 Total
- ------------------------------------------------------ ------------ ------------ ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Sales $248,095 $87,972 $50,788 $161,286 $548,141
Gross Profit (after direct delivery expense) 72,443 17,793 4,161 43,990 138,387
EBITDA (1) 47,147 (6,945) (20,908) 16,716 36,010
EBITDA (including SGU Distributions) (1) 48,524 (5,568) (19,532) 18,093 41,517
EBIT 39,796 (14,380) (28,362) 9,210 6,264
Net Income (Loss) before Extraordinary Items 33,388 (27,454) (40,316) 11,483 (22,899)
Net Income (Loss) 33,388 (27,454) (40,316) 11,483 (22,899)
Net Income (Loss) to Common 32,492 (28,375) (42,177) 10,517 (27,543)
Cash Flow (Loss) to Common 39,328 (17,035) (30,400) 7,000 (1,107)
Less: Maintenance Capex (2) 750 750 750 750 3,000
Free Cash Flow (Loss) 38,578 (17,785) (31,150) 6,250 (4,107)
PER SHARE DATA
- ------------------------------------------------------
Earnings (Loss) per Share before Extra Items $1.26 ($1.09) ($1.61) $0.40 ($1.06)
Earnings (Loss) per Share $1.26 ($1.09) ($1.61) $0.40 ($1.06)
Cash Flow (Loss) per Share $1.53 ($0.66) ($1.16) $0.27 ($0.04)
Free Cash Flow (Loss) per Share $1.50 ($0.69) ($1.19) $0.24 ($0.16)
Dividends Paid per Share $0.08 $0.08 $0.08 $0.08 $0.30
Weighted Average Shares Outstanding 25,759 25,935 26,147 26,359 26,050
BALANCE SHEET DATA
- ------------------------------------------------------
Working Capital $78,544 $54,179 $5,414 $12,436 $12,436
Total Assets 296,338 259,761 223,918 247,846 247,846
Total Debt (including short-term) 297,888 291,654 291,472 294,348 294,348
Preferred Stock (including current maturities) 42,500 42,500 38,334 36,656 36,656
Total Stockholders' Equity (Deficiency) (116,158) (145,848) (189,361) (177,033) (177,033)
Total Capitalization 224,230 188,306 140,445 153,971 153,971
FINANCIAL RATIO DATA
- ------------------------------------------------------
Interest Expense $8,805 $8,344 $8,432 $8,232 $33,813
EBITDA to Interest Expense -- -- -- -- 1.1 x
EBITDA (including SGU Distributions) to Interest Expense -- -- -- -- 1.2 x
Total Debt to EBITDA -- -- -- -- 8.2 x
Total Debt to EBITDA (including SGU Distributions) -- -- -- -- 7.1 x
Total Debt to Total Capitalization 132.8% 154.9% 207.5% 191.2% 191.2%
Total Debt & Preferred to Total Capitalization 151.8% 177.5% 234.8% 215.0% 215.0%
<CAPTION>
LTM
Fiscal 1998 Ended
---------------------------- June 30,
INCOME STATEMENT DATA Q1 Q2 1998
- ------------------------------------------------------ ------------ -------------- -----------
Net Sales $183,139 $66,227 $461,440
Gross Profit (after direct delivery expense) 63,483 14,081 125,715
EBITDA (1) 40,733 (6,355) 30,186
EBITDA (including SGU Distributions) (1) 42,154 (4,934) 35,781
EBIT 33,318 (13,432) 734
Net Income (Loss) before Extraordinary Items 26,978 (22,974) (24,829)
Net Income (Loss) 26,978 (22,974) (24,829)
Net Income (Loss) to Common 25,415 (23,939) (30,184)
Cash Flow (Loss) to Common 32,165 (12,857) (4,092)
Less: Maintenance Capex (2) 750 750 3,000
Free Cash Flow (Loss) 31,415 (13,607) (7,092)
PER SHARE DATA
- ------------------------------------------------------
Earnings (Loss) per Share before Extra Items $0.96 ($0.90) ($1.14)
Earnings (Loss) per Share $0.96 ($0.90) ($1.14)
Cash Flow (Loss) per Share $1.21 ($0.48) ($0.15)
Free Cash Flow (Loss) per Share $1.18 ($0.51) ($0.27)
Dividends Paid per Share
Weighted Average Shares Outstanding 26,564 26,571 26,410
BALANCE SHEET DATA
- ------------------------------------------------------
Working Capital $40,653 $23,139 $23,139
Total Assets 248,777 229,120 229,120
Total Debt (including short-term) 287,010 286,978 286,978
Preferred Stock (including current maturities) 36,819 36,854 36,854
Total Stockholders' Equity (Deficiency) (151,137) (175,066) (175,066)
Total Capitalization 172,692 148,766 148,766
FINANCIAL RATIO DATA
- ------------------------------------------------------
Interest Expense $8,275 $8,210 $33,149
EBITDA to Interest Expense -- -- 0.9 x
EBITDA (including SGU Distributions) to Interest Expense -- -- 1.1 x
Total Debt to EBITDA -- -- 9.5 x
Total Debt to EBITDA (including SGU Distributions) -- -- 8.0 x
Total Debt to Total Capitalization 166.2% 192.9% 192.9%
Total Debt & Preferred to Total Capitalization 187.5% 217.7% 217.7%
</TABLE>
- ---------------
(1) EBITDA excludes non-recurring expenses.
(2) Petro provided estimate for maintenance capital expenditures.
- ------------------------------------------------------------------------------
Dain Rauscher Wessels Page 4
<PAGE>
LOGO PETRO Pro Forma Analysis
Star Gas Summary Historical Financial Data
- --------------------------------------------------------------------------------
STAR GAS PARTNERS, L.P.
Summary Historical Financial Data
(In thousands, except as otherwise indicated)
<TABLE>
<CAPTION>
At or for the Year Ended September 30,
-------------------------------------------------
INCOME STATEMENT DATA 1993 1994 1995 1996
- ------------------------------------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales $ 143,216 $ 128,040 $ 104,550 $ 119,634
Gross Profit (after delivery and branch expense) 23,103 27,957 19,668 26,327
EBITDA 19,437 21,946 13,541 19,870
EBIT (30,313) 8,907 3,468 10,062
Net Income (Loss) (47,049) (1,404) (6,169) 2,593
Limited Partners' Interest in Net Income (Loss)
Cash Flow (Loss) 4,271 11,966 5,626 13,083
Maintenance Capex 4,688 5,419 7,988 5,332
Distributable Cash Flow (Loss) (417) 6,547 (2,362) 7,751
PER UNIT DATA
- ------------------------------------------------
Net Income (Loss) per Unit
Cash Flow (Loss) per Unit
Distributable Cash Flow (Loss) per Unit
Cash Distributions per Unit $1.17 (1)
Weighted Avg. Limited Partner Units Outstanding
BALANCE SHEET DATA
- ------------------------------------------------
Working Capital (Deficit) $1,976 ($486) $7,546
Total Assets 147,608 155,393 156,913
Total Debt (including short-term) 74,929 2,137 87,350
Cumulative Redeemable Preferred Stock 8,264 8,625 --
Total Partners' Capital 44,328 44,305 61,398
Total Capitalization 127,521 55,067 148,748
FINANCIAL RATIO DATA
- ------------------------------------------------
Interest Expense $16,479 $10,497 $8,549 $7,124
EBITDA to Interest Expense 1.2 x 2.1 x 1.6 x 2.8 x
Total Debt to EBITDA 3.4 x 0.2 x 4.4 x
Total Debt to Total Capitalization 58.8% 3.9% 58.7%
<CAPTION>
At or for the Year Ended September 30, 1997
------------------------------------------------------------
INCOME STATEMENT DATA Q1 Q2 Q3 Q4 Total
- ------------------------------------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales $ 50,876 $ 46,442 $ 20,078 $ 17,763 $ 135,159
Gross Profit (after delivery and branch expense) 12,001 12,019 1,744 757 26,521
EBITDA 10,402 9,725 253 (677) 19,703
EBIT 7,816 7,095 (2,400) (3,213) 9,298
Net Income (Loss) 5,892 5,325 (4,143) (5,062) 2,012
Limited Partners' Interest in Net Income (Loss) 5,774 5,218 (4,060) (4,960) (1,972)
Cash Flow (Loss) 8,650 8,049 (1,245) (2,430) 13,024
Maintenance Capex 2,517 1,271 666 825 5,279
Distributable Cash Flow (Loss) 6,133 6,778 (1,911) (3,255) 7,745
PER UNIT DATA
- ------------------------------------------------
Net Income (Loss) per Unit $1.10 $0.99 ($0.77) ($0.94) $0.37
Cash Flow (Loss) per Unit $1.61 $1.50 ($0.23) ($0.45) $2.42
Distributable Cash Flow (Loss) per Unit $1.14 $1.26 ($0.36) ($0.61) $1.44
Cash Distributions per Unit $0.55 $0.55 $0.55 $0.55 $2.20
Weighted Avg. Limited Partner Units Outstanding 5,271 5,271 5,271 5,271 5,271
BALANCE SHEET DATA
- ------------------------------------------------
Working Capital (Deficit) $12,428 $14,583 $9,684 $3,319 $3,319
Total Assets 168,485 158,678 153,767 147,469 147,469
Total Debt (including short-term) 91,850 85,000 85,000 85,000 85,000
Cumulative Redeemable Preferred Stock -- -- -- -- --
Total Partners' Capital 64,332 66,699 59,598 51,578 51,578
Total Capitalization 156,182 151,699 144,598 136,578 136,578
FINANCIAL RATIO DATA
- ------------------------------------------------
Interest Expense $1,848 $1,771 $1,671 $1,676 $6,966
EBITDA to Interest Expense -- -- -- -- 2.8 x
Total Debt to EBITDA -- -- -- -- 4.3 x
Total Debt to Total Capitalization 58.8% 56.0% 58.8% 62.2% 62.2%
<CAPTION>
LTM
Fiscal 1998 Ended
---------------------------------- June 30,
INCOME STATEMENT DATA Q1 Q2 Q3 1998
- ------------------------------------------------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
Sales $ 41,844 $ 37,884 $ 16,243 $ 113,734
Gross Profit (after delivery and branch expense) 10,041 12,736 1,187 24,721
EBITDA 8,672 11,287 (415) 18,867
EBIT 5,847 8,381 (3,328) 7,687
Net Income (Loss) 3,707 6,363 (5,235) (227)
Limited Partners' Interest in Net Income (Loss) 3,633 6,236 (5,130) (221)
Cash Flow (Loss) 6,690 9,421 (2,179) 11,502
Maintenance Capex 2,085 943 797 4,650
Distributable Cash Flow (Loss) 4,605 8,478 (2,976) 6,852
PER UNIT DATA
- ------------------------------------------------
Net Income (Loss) per Unit $0.66 $1.00 ($0.82) ($0.04)
Cash Flow (Loss) per Unit $1.20 $1.48 ($0.34) $1.94
Distributable Cash Flow (Loss) per Unit $0.82 $1.33 ($0.47) $1.16
Cash Distributions per Unit $0.55 $0.55 $0.55 $2.20
Weighted Avg. Limited Partner Units Outstanding 5,474 6,228 6,228 5,800
BALANCE SHEET DATA
- ------------------------------------------------
Working Capital (Deficit) $10,475 $14,841 $4,242 $4,242
Total Assets 179,451 178,308 173,265 173,265
Total Debt (including short-term) 96,000 96,000 96,950 96,950
Cumulative Redeemable Preferred Stock -- -- -- --
Total Partners' Capital 71,883 74,751 66,020 66,020
Total Capitalization 167,883 170,751 162,970 162,970
FINANCIAL RATIO DATA
- ------------------------------------------------
Interest Expense $2,086 $1,875 $1,873 $7,510
EBITDA to Interest Expense -- -- -- 2.5 x
Total Debt to EBITDA -- -- -- 5.1 x
Total Debt to Total Capitalization 57.2% 56.2% 59.5% 59.5%
</TABLE>
Note: Financial data prior to December 20, 1995 reflects operations of the
Predecessor Company.
(1) Includes two quarters of distributions and a pro rata distribution of
$0.0725 per Unit for the period December 20, 1995 to December 31, 1995.
- ------------------------------------------------------------------------------
Dain Rauscher Wessels Page 5
<PAGE>
LOGO PETRO Pro Forma Analysis
Pro Forma Unit Coverage Analysis
- ------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Pro Forma Unit Coverage Analysis
(In thousands, except as otherwise indicated)
<TABLE>
<CAPTION>
Projected for the Year Ended September 30,
--------------------------------------------------------------------
15 Year Weather Case
---------------------------------------------------------
Estimated Normalized
Pro Forma EBITDA 1998E 1998E 1999E 2000E 2001E 2002E
- ------------------------------------------ --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Star $ 18,781 $ 20,731 $ 23,032 $ 24,465 $ 25,898 $ 27,331
Petro 37,630 44,749 46,094 49,605 52,824 55,897
Synergies 500 500 500 500 500 500
--------- --------- --------- --------- --------- ---------
Pro Forma EBITDA $ 56,911 $ 65,980 $ 69,626 $ 74,570 $ 79,222 $ 83,728
Distributable Cash Flow
- ------------------------------------------
Pro Forma EBITDA $ 56,911 $ 65,980 $ 69,626 $ 74,570 $ 79,222 $ 83,728
Interest Expense (27,722) (27,722) (28,186) (29,479) (31,065) (32,560)
Maintenance Capex (6,210) (6,210) (6,298) (6,419) (6,541) (6,667)
Other (525) (525) (525) (525) (525) (525)
--------- --------- --------- --------- --------- ---------
Distributable Cash Flow $ 22,454 $ 31,523 $ 34,617 $ 38,147 $ 41,091 $ 43,976
Weighted Average Units Outstanding
- ------------------------------------------
Common Units 10,311 10,311 10,682 11,260 11,676 12,111
Senior Subordinated Units (incl. DPUs) 2,766 2,766 2,766 3,069 3,372 3,675
Junior Subordinated & General Partner Units 857 857 857 857 857 857
--------- --------- --------- --------- --------- ---------
Total Weighted Average Units Outstanding 13,934 13,934 14,305 15,186 15,905 16,643
Distributable Cash Flow per Unit
- ------------------------------------------
Common Units $ 2.18 $ 3.06 $ 3.24 $ 3.39 $ 3.52 $ 3.63
Senior Subordinated Units (incl. DPUs) $ 1.72 $ 2.41 $ 2.57 $ 2.66 $ 2.73 $ 2.79
Junior Subordinated & General Partner Units $ 1.61 $ 2.26 $ 2.42 $ 2.51 $ 2.58 $ 2.64
--------- --------- --------- --------- --------- ---------
Total Units Outstanding $ 1.61 $ 2.26 $ 2.42 $ 2.51 $ 2.58 $ 2.64
Distributions per Unit
- ------------------------------------------
MQD per Unit $ 2.20 $ 2.20 $ 2.30 $ 2.30 $ 2.30 $ 2.30
Indicated Distribution per Unit $ 2.20 $ 2.20 $ 2.30 $ 2.40 $ 2.40 $ 2.50
MQD Coverage per Unit
- ------------------------------------------
Common Units 0.99 x 1.39 x 1.41 x 1.47 x 1.53 x 1.58 x
Senior Subordinated Units (incl. DPUs) 0.78 x 1.10 x 1.12 x 1.16 x 1.19 x 1.21 x
Junior Subordinated & General Partner Units 0.73 x 1.03 x 1.05 x 1.09 x 1.12 x 1.15 x
--------- --------- --------- --------- --------- ---------
Total Units 0.73 x 1.03 x 1.05 x 1.09 x 1.12 x 1.15 x
Indicated Distribution Coverage per Unit
- ------------------------------------------
Common Units 0.99 x 1.39 x 1.41 x 1.41 x 1.47 x 1.45 x
Senior Subordinated Units (incl. DPUs) 0.78 x 1.10 x 1.12 x 1.11 x 1.14 x 1.11 x
Junior Subordinated & General Partner Units 0.73 x 1.03 x 1.05 x 1.05 x 1.08 x 1.06 x
--------- --------- --------- --------- --------- ---------
Total Units 0.73 x 1.03 x 1.05 x 1.05 x 1.08 x 1.06 x
<CAPTION>
Projected for the Year Ended September 30,
---------------------------------------------------------------------
30 Year Weather Case
---------------------------------------------------------
Estimated Normalized
Pro Forma EBITDA 1998E 1998E 1999E 2000E 2001E 2002E
- ------------------------------------------ --------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Star $ 18,781 $ 22,135 $ 24,491 $ 26,029 $ 27,566 $ 29,104
Petro 37,630 46,900 48,881 53,536 57,814 61,900
Synergies 500 500 500 500 500 500
--------- --------- ---------- ---------- ---------- ----------
Pro Forma EBITDA $ 56,911 $ 69,535 $ 73,872 $ 80,065 $ 85,880 $ 91,504
Distributable Cash Flow
- ------------------------------------------
Pro Forma EBITDA $ 56,911 $ 69,535 $ 73,872 $ 80,065 $ 85,880 $ 91,504
Interest Expense (27,722) (27,608) (28,857) (31,150) (33,254) (35,120)
Maintenance Capex (6,210) (6,210) (6,273) (6,393) (6,516) (6,641)
Other (525) (525) (525) (525) (525) (525)
--------- --------- ---------- ---------- ---------- ----------
Distributable Cash Flow $ 22,454 $ 35,192 $ 38,217 $ 41,997 $ 45,585 $ 49,218
Weighted Average Units Outstanding
- ------------------------------------------
Common Units 10,311 10,311 10,311 10,357 10,550 10,874
Senior Subordinated Units (incl. DPUs) 2,766 2,766 2,766 3,069 3,372 3,675
Junior Subordinated & General Partner Units 857 857 857 857 857 857
--------- --------- ---------- ---------- ---------- ----------
Total Weighted Average Units Outstanding 13,934 13,934 13,934 14,284 14,780 15,407
Distributable Cash Flow per Unit
- ------------------------------------------
Common Units $ 2.18 $ 3.41 $ 3.71 $ 4.05 $ 4.32 $ 4.53
Senior Subordinated Units (incl. DPUs) $ 1.72 $ 2.69 $ 2.92 $ 3.13 $ 3.27 $ 3.38
Junior Subordinated & General Partner Units $ 1.61 $ 2.53 $ 2.74 $ 2.94 $ 3.08 $ 3.19
--------- --------- ---------- ---------- ---------- ----------
Total Units Outstanding $ 1.61 $ 2.53 $ 2.74 $ 2.94 $ 3.08 $ 3.19
Distributions per Unit
- ------------------------------------------
MQD per Unit $ 2.20 $ 2.20 $ 2.30 $ 2.30 $ 2.30 $ 2.30
Indicated Distribution per Unit $ 2.20 $ 2.20 $ 2.30 $ 2.50 $ 2.70 $ 2.90
MQD Coverage per Unit
- ------------------------------------------
Common Units 0.99 x 1.55 x 1.61 x 1.76 x 1.88 x 1.97 x
Senior Subordinated Units (incl. DPUs) 0.78 x 1.22 x 1.27 x 1.36 x 1.42 x 1.47 x
Junior Subordinated & General Partner Units 0.73 x 1.15 x 1.19 x 1.28 x 1.34 x 1.39 x
--------- --------- ---------- ---------- ---------- ----------
Total Units 0.73 x 1.15 x 1.19 x 1.28 x 1.34 x 1.39 x
Indicated Distribution Coverage per Unit
- ------------------------------------------
Common Units 0.99 x 1.55 x 1.61 x 1.62 x 1.60 x 1.56 x
Senior Subordinated Units (incl. DPUs) 0.78 x 1.22 x 1.27 x 1.25 x 1.21 x 1.17 x
Junior Subordinated & General Partner Units 0.73 x 1.15 x 1.19 x 1.18 x 1.14 x 1.10 x
--------- --------- ---------- ---------- ---------- ----------
Total Units 0.73 x 1.15 x 1.19 x 1.18 x 1.14 x 1.10 x
</TABLE>
- --------------------------------------------------------------------------------
Dain Rauscher Wessels Page 6
<PAGE>
Pro Forma Analysis
Pro Forma Credit Analysis
PROJECT INTENSE HEAT
Pro Forma Credit Analysis
(In thousands, except as otherwise indicated)
<TABLE>
<CAPTION>
Projected for the Year Ended September 30,
------------------------------------------------------------------
15 Year Weather Case
Estimated ----------------------------------------------------
Pro Forma EBITDA 1998E 1999E 2000E 2001E 2002E
- ------------------------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Star $ 18,781 $ 23,032 $ 24,465 $ 25,898 $ 27,331
Petro 37,630 46,094 49,605 52,824 55,897
Synergies 500 500 500 500 500
---------- ---------- ---------- ---------- ----------
Pro Forma EBITDA $ 56,911 $ 69,626 $ 74,570 $ 79,222 $ 83,728
Distributable Cash Flow
- ------------------------------------
Pro Forma EBITDA $ 56,911 $ 69,626 $ 74,570 $ 79,222 $ 83,728
Interest Expense (27,722) (28,186) (29,479) (31,065) (32,560)
Maintenance Capex (6,210) (6,298) (6,419) (6,541) (6,667)
Other (525) (525) (525) (525) (525)
---------- ---------- ---------- ---------- ----------
Distributable Cash Flow $ 22,454 $ 34,617 $ 38,147 $ 41,091 $ 43,976
Fixed Charges
- ------------------------------------
Interest Expense $ 27,722 $ 28,186 $ 29,479 $ 31,065 $ 32,560
Lease and Rental Expense 5,281 4,676 4,058 3,642 3,541
---------- ---------- ---------- ---------- ----------
Total Fixed Charges $ 33,003 $ 32,862 $ 33,537 $ 34,707 $ 36,101
Pro Forma Balance Sheet Data
- ------------------------------------
Working Capital $ 7,177 $ 7,177 $ 7,177 $ 7,177 $ 7,177
Total Assets 376,824 379,732 379,450 373,923 363,512
Total Long-Term Debt 314,234 329,549 351,798 372,734 393,010
Total Partners' Capital (Deficit) (37,889) (55,252) (84,504) (117,291) (154,104)
Total Capitalization 276,345 274,297 267,294 255,443 238,906
Pro Forma Credit Analysis
- ------------------------------------
Interest Coverage Ratio (1) 2.05 x 2.47 x 2.53 x 2.55 x 2.57 x
Fixed Charge Coverage Ratio (2) 1.72 x 2.12 x 2.22 x 2.28 x 2.32 x
Total Debt to Total Capitalization 113.7% 120.1% 131.6% 145.9% 164.5%
Total Debt to EBITDA 5.52 x 4.73 x 4.72 x 4.70 x 4.69 x
Total Debt to Distributable Cash Flow 13.99 x 9.52 x 9.22 x 9.07 x 8.94 x
<CAPTION>
Projected for the Year Ended September 30,
------------------------------------------------------------------
30 Year Weather Case
Estimated ----------------------------------------------------
Pro Forma EBITDA 1998E 1999E 2000E 2001E 2002E
- ------------------------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Star $ 18,781 $ 24,491 $ 26,029 $ 27,566 $ 29,104
Petro 37,630 48,881 53,536 57,814 61,900
Synergies 500 500 500 500 500
---------- ---------- ---------- ---------- ----------
Pro Forma EBITDA $ 56,911 $ 73,872 $ 80,065 $ 85,880 $ 91,504
Distributable Cash Flow
- ------------------------------------
Pro Forma EBITDA $ 56,911 $ 73,872 $ 80,065 $ 85,880 $ 91,504
Interest Expense (27,722) (28,857) (31,150) (33,254) (35,120)
Maintenance Capex (6,210) (6,273) (6,393) (6,516) (6,641)
Other (525) (525) (525) (525) (525)
---------- ---------- ---------- ---------- ----------
Distributable Cash Flow $ 22,454 $ 38,217 $ 41,997 $ 45,585 $ 49,218
Fixed Charges
- ------------------------------------
Interest Expense $ 27,722 $ 28,857 $ 31,150 $ 33,254 $ 35,120
Lease and Rental Expense 5,281 4,676 4,058 3,642 3,541
---------- ---------- ---------- ---------- ----------
Total Fixed Charges $ 33,003 $ 33,533 $ 35,208 $ 36,896 $ 38,661
Pro Forma Balance Sheet Data
- ------------------------------------
Working Capital $ 7,177 $ 7,177 $ 7,177 $ 7,177 $ 7,177
Total Assets 376,824 384,961 389,763 388,457 381,446
Total Long-Term Debt 314,234 348,066 379,371 405,538 430,848
Total Partners' Capital (Deficit) (37,889) (69,178) (103,669) (138,643) (178,219)
Total Capitalization 276,345 278,888 275,702 266,895 252,629
Pro Forma Credit Analysis
- ------------------------------------
Interest Coverage Ratio (1) 2.05 x 2.56 x 2.57 x 2.58 x 2.61 x
Fixed Charge Coverage Ratio (2) 1.72 x 2.20 x 2.27 x 2.33 x 2.37 x
Total Debt to Total Capitalization 113.7% 124.8% 137.6% 151.9% 170.5%
Total Debt to EBITDA 5.52 x 4.71 x 4.74 x 4.72 x 4.71 x
Total Debt to Distributable Cash Flow 13.99 x 9.11 x 9.03 x 8.90 x 8.75 x
</TABLE>
- ---------------
(1) Interest coverage ratio is EBITDA divided by interest expense.
(2) Fixed charge coverage ratio is EBITDA divided by total fixed charges.
- ------------------------------------------------------------------------------
Dain Rauscher Wessels Page 7
<PAGE>
LOGO PETRO Project Intense Heat
- ------------------------------------------------------------------------------
Unit Reference Value Analysis
- ------------------------------------------------------------------------------
Dain Rauscher Wessels Page 8
<PAGE>
LOGO PETRO Unit Reference Value Analysis
Unit Reference Value Analysis Summary
- ------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Unit Reference Value Analysis Summary
<TABLE>
<CAPTION>
Dain
15 Year 30 Year Rauscher
Downside Weather Weather Wessels
Indicated Reference Values per Star Unit Case Case Case Case
- ---------------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Common Unit $ 20.75 $ 26.33 $ 31.55 $ 22.54
Senior Subordinated Unit $ 17.74 $ 26.90 $ 35.62 $ 22.76
Junior Subordinated / General Partner Unit $ 13.74 $ 20.78 $ 27.83 $ 17.73
Exchange Ratio (Petro Share / Star Unit)
- ----------------------------------------------------------
Senior Subordinated Unit 0.13064 0.13064 0.13064 0.13064
Junior Subordinated / General Partner Unit 0.15913 0.15913 0.15913 0.15913
Implied Reference Value per Petro Share Senior Subordinated Unit
- ---------------------------------------------------------- ----------------------------------------------
Implied Reference Value (excluding DPUs and GP Incentives) $ 2.32 $ 2.98 $ 3.80 $ 2.54
DPUs and GP Incentives Value -- 0.54 0.85 0.43
--------- --------- --------- ---------
Total Implied Reference Value $ 2.32 $ 3.51 $ 4.65 $ 2.97
========= ========= ========= =========
Implied Reference Value per Petro Share Junior Subordinated / General Partner Unit
----------------------------------------------
Implied Reference Value (excluding DPUs and GP Incentives) $ 2.19 $ 2.76 $ 3.57 $ 2.39
DPUs and GP Incentives Value 0.54 0.86 0.44
Total Implied Reference Value $ 2.19 $ 3.31 $ 4.43 $ 2.82
</TABLE>
- ------------------------------------------------------------------------------
Dain Rauscher Wessels Page 9
<PAGE>
LOGO PETRO Unit Reference Value Analysis
Unit Reference Value Analysis Discount Rate Assumptions
- ------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Unit Reference Value Analysis Discount Rate Assumptions
<TABLE>
<CAPTION>
15 Year 30 Year Dain Rauscher
Downside Case Weather Case Weather Case Wessels Case
-------------------- -------------------- -------------------- --------------------
Discount Bps Spread Discount Bps Spread Discount Bps Spread Discount Bps Spread
Rate to Common Rate to Common Rate to Common Rate to Common
-------- ---------- -------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common Unit 11.30% -- 9.50% -- 9.00% -- 10.75% --
Senior Subordinated Unit
- ------------------------------------------
Senior Subordinated Unit Distributions 13.30% 200 bps 11.00% 150 bps 9.75% 75 bps 12.50% 175 bps
Petro Incentive Distributions (DPU) -- -- 13.00% 350 bps 12.50% 350 bps 14.25% 350 bps
GP Incentive Distributions -- -- 13.50% 400 bps 13.00 400 bps 14.75% 400 bps
Junior Subordinated / General Partner Unit
- ------------------------------------------
Junior Subordinated Unit Distributions 14.30% 300 bps 12.00% 250 bps 10.50% 150 bps 13.50% 275 bps
Petro Incentive Distributions (DPU) -- -- 13.00% 350 bps 12.50% 350 bps 14.25% 350 bps
GP Incentive Distributions -- -- 13.50% 400 bps 13.00% 400 bps 14.75% 400 bps
</TABLE>
Dain Rauscher Wessels Page 10
<PAGE>
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Projected Indicated Distribution per Unit and Cash Distributions per Unit Class
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Projected Indicated Distribution per Unit and Cash Distributions per Unit Class
(In thousands, except as otherwise indicated)
<TABLE>
<CAPTION>
Projected for the Year Ended September 30,
-----------------------------------------------
15 Year Weather Case
-----------------------------------------------
Distributable Cash Flow 1999E 2000E 2001E 2002E
- ---------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Distributable Cash Flow $34,617 $38,147 $41,091 $43,976
Indicated Distribution per Unit $2.30 $2.40 $2.40 $2.50
Cash Distributions
- ----------------------------------------------
Distributions to Unitholders $32,902 $36,447 $38,173 $41,608
GP Incentive Distributions 0 0 0 247
--------- --------- --------- ---------
Total Cash Distributions $32,902 $36,447 $38,173 $41,855
========= ========= ========= =========
Weighted Average Units Outstanding
- ----------------------------------------------
Common Units 10,682 11,260 11,676 12,111
Senior Subordinated Units (Incl. DPUs) 2,766 3,069 3,372 3,675
Junior Subordinated Units 578 578 578 578
General Partner Units 279 279 279 279
--------- --------- --------- ---------
Total Units Outstanding 14,305 15,186 15,905 16,643
<CAPTION>
Splits
----------------------
Annual Unit. GP
GP Incentive Distributions Targets Target holders Incentives
- ---------------------------------------------- --------- --------- ----------
<S> <C> <C> <C>
Minimum Quarterly Distribution $2,300 98% 2%
First Target Distribution $2,416 98% 2%
Second Target Distribution $2,844 85% 15%
Third Target Distribution $3,704 75% 25%
Thereafter -- 50% 50%
<CAPTION>
Cash Distributions prior to First Target
- ----------------------------------------------
<S> <C> <C> <C> <C>
Cash Distributed to Unitholders $32,902 $36,447 $38,173 $40,210
Allocation to Common Units 24,568 27,023 26,022 29,260
Allocation to Senior Subordinated Units 6,363 7,367 8,094 8,880
Allocation to Junior Subordinated Units 1,330 1,388 1,388 1,397
Allocation to General Partner Units 641 669 669 673
GP Incentive Distributions -- -- -- --
Total Cash Distributed 32,902 36,447 38,173 40,210
Cash Distributions First to Second Target
- ----------------------------------------------
Cash Distributed to Unitholders $0 $0 $0 $1,398
Allocation to Common Units 0 0 0 1,017
Allocation to Senior Subordinated Units 0 0 0 309
Allocation to Junior Subordinated Units 0 0 0 49
Allocation to General Partner Units 0 0 0 23
GP Incentive Distributions 0 0 0 247
Total Cash Distributed 0 0 0 1,645
Cash Distributions Second to Third Target
- ----------------------------------------------
Cash Distributed to Unitholders $0 $0 $0 $0
Allocation to Common Units 0 0 0 0
Allocation to Senior Subordinated Units 0 0 0 0
Allocation to Junior Subordinated Units 0 0 0 0
Allocation to General Partner Units 0 0 0 0
GP Incentive Distributions 0 0 0 0
Total Cash Distributed 0 0 0 0
Cash Distributions Third to Thereafter Target
- ----------------------------------------------
Cash Distributed to Unitholders $0 $0 $0 $0
Allocation to Common Units 0 0 0 0
Allocation to Senior Subordinated Units 0 0 0 0
Allocation to Junior Subordinated Units 0 0 0 0
Allocation to General Partner Units 0 0 0 0
GP Incentive Distributions 0 0 0 0
Total Cash Distributed 0 0 0 0
<CAPTION>
Projected for the Year Ended September 30,
-----------------------------------------------
30 Year Weather Case
-----------------------------------------------
<S> <C> <C> <C> <C>
Distributable Cash Flow 1999E 2000E 2001E 2002E
- ---------------------------------------------- --------- --------- --------- ---------
Distributable Cash Flow $38,217 $41,997 $45,585 $49,218
Indicated Distribution per Unit $2.30 $2.50 $2.70 $2.90
Cash Distributions
- ----------------------------------------------
Distributions to Unitholders $32,049 $35,709 $39,905 $44,680
GP Incentive Distributions 0 212 714 1,451
--------- --------- --------- ---------
Total Cash Distributions $32,049 $35,921 $40,646 $46,131
========= ========= ========= =========
Weighted Average Units Outstanding
- ----------------------------------------------
Common Units $10,311 10,357 10,550 10,874
Senior Subordinated Units (Incl. DPUs) 2,766 3,069 3,372 3,675
Junior Subordinated Units 578 578 578 578
General Partner Units 279 279 279 279
--------- --------- --------- ---------
Total Units Outstanding 13,934 14,284 14,780 15,407
Cash Distributions prior to First Target
- ----------------------------------------------
Cash Distributed to Unitholders $32,049 $34,510 $35,708 $37,223
Allocation to Common Units 23,715 25,023 25,489 26,272
Allocation to Senior Subordinated Units 6,363 7,416 8,148 8,880
Allocation to Junior Subordinated Units 1,330 1,397 1,397 1,397
Allocation to General Partner Units 641 673 673 673
GP Incentive Distributions -- -- -- --
Total Cash Distributed 32,049 34,510 35,708 37,223
Cash Distributions First to Second Target
- ----------------------------------------------
Cash Distributed to Unitholders $0 $1,200 $4,197 $6,594
Allocation to Common Units 0 870 2,996 4,654
Allocation to Senior Subordinated Units 0 258 958 1,573
Allocation to Junior Subordinated Units 0 49 164 248
Allocation to General Partner Units 0 23 79 119
GP Incentive Distributions 0 212 741 1,164
Total Cash Distributed 0 1,412 4,938 7,758
Cash Distributions Second to Third Target
- ----------------------------------------------
Cash Distributed to Unitholders $0 $0 $0 $863
Allocation to Common Units 0 0 0 609
Allocation to Senior Subordinated Units 0 0 0 206
Allocation to Junior Subordinated Units 0 0 0 32
Allocation to General Partner Units 0 0 0 16
GP Incentive Distributions 0 0 0 288
Total Cash Distributed 0 0 0 1,150
Cash Distributions Third to Thereafter Target
- ----------------------------------------------
Cash Distributed to Unitholders $0 $0 $0 $0
Allocation to Common Units 0 0 0 0
Allocation to Senior Subordinated Units 0 0 0 0
Allocation to Junior Subordinated Units 0 0 0 0
Allocation to General Partner Units 0 0 0 0
GP Incentive Distributions 0 0 0 0
Total Cash Distributed 0 0 0 0
</TABLE>
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 11
<PAGE>
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Projected Indicated Distribution per Unit and Cash Distributions per Unit Class
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Projected Indicated Distribution per Unit and Cash Distributions per Unit Class
(In thousands, except as otherwise indicated)
<TABLE>
<CAPTION>
Projected for the Year Ended September 30,
-----------------------------------------------------------
15 Year Weather Case
-----------------------------------------------------------
Common Unit Cash Distributions 1999E 2000E 2001E 2002E
- ------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash Distributions prior to First Target $24,568 $27,023 $28,022 $29,260
Cash Distributions First to Second Target 0 0 0 1,017
Cash Distributions Second to Third Target 0 0 0 0
Cash Distributions Third to Thereafter Target 0 0 0 0
--------- --------- --------- ---------
Total Cash Distributions $24,568 $27,023 $28,022 $30,277
Total Cash Distributions per Unit $2,300 $2,400 $2,400 $2,500
Weighted Average units Outstanding 10,682 11,260 11,676 12,111
Senior Subordinated Unit Cash Distributions
- -------------------------------------------------
Cash Distributions prior to First Target $6,363 $7,367 $8,094 $8,880
Cash Distributions First to Second Target 0 0 0 309
Cash Distributions Second to Third Target 0 0 0 0
Cash Distributions Third to Thereafter Target 0 0 0 0
--------- --------- --------- ---------
Total Cash Distributions $6,363 $7,367 $8,094 $9,169
Total Cash Distributions per Unit $2,300 $2,400 $2,400 $2,500
Weighted Average Units Outstanding 2,766 3,069 3,372 3,675
Junior Subordinated Unit Cash Distributions
- -------------------------------------------------
Cash Distributions prior to First Target $1,330 $1,388 $1,388 $1,397
Cash Distributions First to Second Target 0 0 0 49
Cash Distributions Second to Third Target 0 0 0 0
Cash Distributions Third to Thereafter Target 0 0 0 0
--------- --------- --------- ---------
Total Cash Distributions $1,330 $1,388 $1,388 $1,446
Total Cash Distributions per Unit $2,300 $2,400 $2,400 $2,500
Weighted Average Units Outstanding 578 578 578 578
General Partner Unit Cash Distributions
- -------------------------------------------------
Cash Distributions prior to First Target $641 $669 $669 $673
Cash Distributions First to Second Target 0 0 0 23
Cash Distributions Second to Third Target 0 0 0 0
Cash Distributions Third to Thereafter Target 0 0 0 0
--------- --------- --------- ---------
Total Cash Distributions $641 $669 $669 $697
Total Cash Distributions per Unit $2,300 $2,400 $2,400 $2,500
Weighted Average Units Outstanding 279 279 279 279
GP Incentive Distributions
- -------------------------------------------------
Cash distributions prior to First Target - - - -
Cash Distributions First to Second Target 0 $0 $0 $247
Cash Distributions Second to Third Target 0 0 0 0
Cash Distributions Third to Thereafter Target 0 0 0 0
--------- --------- --------- ---------
Total Cash Distributions $0 $0 $0 $247
Total Cash Distributions per unit (Sr, Jr & GP) $0.000 $0.000 $0.000 $0.054
Weighted Average Units Outstanding (Sr, Jr & GP) 3,624 3,927 4,230 4,533
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Projected for the Year Ended September 30,
-----------------------------------------------------------
30 Year Weather Case
-----------------------------------------------------------
Common Unit Cash Distributions 1999E 2000E 2001E 2002E
- ------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash Distributions prior to First Target $23,715 $25,023 $25,489 $26,272
Cash Distributions First to Second Target 0 870 2,996 4,654
Cash Distributions Second to Third Target 0 0 0 609
Cash Distributions Third to Thereafter Target 0 0 0 0
--------- --------- --------- ---------
Total Cash Distributions $23,715 $25,893 $28,486 $31,535
Total Cash Distributions per Unit $2,300 $2,500 $2,700 $2,900
Weighted Average units Outstanding 10,311 10,357 10,550 10,874
Senior Subordinated Unit Cash Distributions
- -------------------------------------------------
Cash Distributions prior to First Target $6,363 $7,416 $8,148 $8,880
Cash Distributions First to Second Target 0 258 958 1,573
Cash Distributions Second to Third Target 0 0 0 206
Cash Distributions Third to Thereafter Target 0 0 0 0
--------- --------- --------- ---------
Total Cash Distributions $6,363 $7,674 $9,106 $10,659
Total Cash Distributions per Unit $2,300 $2,500 $2,700 $2,900
Weighted Average Units Outstanding 2,766 3,069 3,372 3,675
Junior Subordinated Unit Cash Distributions
- -------------------------------------------------
Cash Distributions prior to First Target $1,330 $1,397 $1,397 $1,397
Cash Distributions First to Second Target 0 49 164 248
Cash Distributions Second to Third Target 0 0 0 32
Cash Distributions Third to Thereafter Target 0 0 0 0
--------- --------- --------- ---------
Total Cash Distributions $1,330 $1,446 $1,562 $1,677
Total Cash Distributions per Unit $2,300 $2,500 $2,700 $2,900
Weighted Average Units Outstanding 578 578 578 578
General Partner Unit Cash Distributions
- -------------------------------------------------
Cash Distributions prior to First Target $641 $673 $673 $673
Cash Distributions First to Second Target 0 23 79 119
Cash Distributions Second to Third Target 0 0 0 16
Cash Distributions Third to Thereafter Target 0 0 0 0
--------- --------- --------- ---------
Total Cash Distributions $641 $697 $752 $808
Total Cash Distributions per Unit $2,300 $2,500 $2,700 $2,900
Weighted Average Units Outstanding 279 279 279 279
GP Incentive Distributions
- -------------------------------------------------
Cash distributions prior to First Target - - - -
Cash Distributions First to Second Target $0 $212 $741 $1,164
Cash Distributions Second to Third Target 0 0 0 288
Cash Distributions Third to Thereafter Target 0 0 0 0
--------- --------- --------- ---------
Total Cash Distributions $0 $212 $741 $1,451
Total Cash Distributions per unit (Sr, Jr & GP) $0.000 $0.054 $0.175 $0.320
Weighted Average Units Outstanding (Sr, Jr & GP) 3,624 3,927 4,230 4,533
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
Dain Rauscher Wessels Page 12
<PAGE>
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Cumulative Incremental DPU per Unit Calculation
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Cumulative Incremental DPU per Unit Calculation
(In thousands, except as otherwise indicated)
<TABLE>
<CAPTION>
Projected for the Year Ended September 30,
------------------------------------------
15 Year Weather Case
------------------------------------------
Units to Receive DPUs 1999E 2000E 2001E 2002E
- ---------------------------------------------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C>
Senior Subordinated Units (Includes DPUs) 2,766 3,069 3,372 3,675
Junior Subordinated Units 578 578 578 578
General Partner Units 279 279 279 279
- ---------------------------------------------- ----------- --------- --------- ----------
Total Units 3,624 3,927 4,230 4,533
Cumulative Incremental DPU per Unit
- ----------------------------------------------
DPUs Distributed 0 303 303 303
DPU per Outstanding Unit 0.000 0.084 0.077 0.072
- ------------------------------------------------------------------------------------------------
Cumulative incremental DPU per Unit 0.000 0.084 0.167 0.251
- ------------------------------------------------------------------------------------------------
<CAPTION>
Projected for the Year Ended September 30,
------------------------------------------
30 Year Weather Case
------------------------------------------
Units to Receive DPUs 1999E 2000E 2001E 2002E
- ---------------------------------------------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C>
Senior Subordinated Units (Includes DPUs) 2,766 3,069 3,372 3,675
Junior Subordinated Units 578 578 578 578
General Partner Units 279 279 279 279
- ---------------------------------------------- ----------- --------- --------- ----------
Total Units 3,624 3,927 4,230 4,533
Cumulative Incremental DPU per Unit
- ----------------------------------------------
DPUs Distributed 0 303 303 303
DPU per Outstanding Unit 0.000 0.084 0.077 0.072
- ------------------------------------------------------------------------------------------------
Cumulative incremental DPU per Unit 0.000 0.084 0.167 0.251
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
Dain Rauscher Wessels Page 13
<PAGE>
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Unit Reference Value Analysis
(Downside Case)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Unit Reference Value Analysis (Downside Case)
<TABLE>
<CAPTION>
Downside Case
-----------------------------------------------------------------------------------------
Projected for the Year Ended September 30,
------------------------------------------ Terminal Total Liquidity Adjusted
Common Unit (1) 1998E 2000E 2001E 2002E Value (2) NPV Discount (3) NPV
- ----------------------------------------- ------- ------- ------- ------- ----------- ------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Distributions $2.30 $2.30 $2.30 $2.30 $20.36
Period 0.50 1.50 2.50 3.50 4.00
- ------------------------------------------------------------------------------------------------------------------------------------
NPV @ 11.30% $2.18 $1.96 $1.76 $1.58 $13.27 $20.75 -- $20.75
- ------------------------------------------------------------------------------------------------------------------------------------
Senior Subordinated Unit
- -----------------------------------------
Cash Distributions $2.30 $2.30 $2.30 $2.30 $17.30
Period 0.50 1.50 2.50 3.50 4.00
- ------------------------------------------------------------------------------------------------------------------------------------
NPV @ 13.30% (200 bps spread to Common) $2.16 $1.91 $1.68 $1.49 $10.50 $17.74 -- $17.74
- ------------------------------------------------------------------------------------------------------------------------------------
Junior Subordinated/General Partner Unit
- -----------------------------------------
Cash Distributions $2.30 $2.30 $2.30 $2.30 $18.09
Period 0.50 1.50 2.50 3.50 4.00
- ------------------------------------------------------------------------------------------------------------------------------------
NPV @ 14.30% (300 bps spread to Common) $2.15 $1.88 $1.65 $1.44 $9.43 $16.55 17.0% $13.74
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------
(1) Common Unit discount rate is derived by using the appropriate rate to
calculate a net present value equal to the 09/25/98 closing price of
$20.75.
(2) Terminal value is calculated as a perpetuity by dividing 2002E distribution
by the discount rate.
(3) The Junior Subordinated and General Partner Unit discount is determined by
using a 20% liquidity discount for both Units and a 10% control premium for
a General Partner Unit. The weighted average based upon pro forma Unit
ownership is a discount of 17%.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 14
<PAGE>
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Common Unit Reference Value Analysis
(15 Year Weather Case)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Common Unit Reference Value Analysis (15 Year Weather Case)
<TABLE>
<CAPTION>
15 Year Weather Case
--------------------------------------------------------------------------------------
Projected for the Year Ended September 30, Terminal Total
----------------------------------------------------
Common Unit (1) 1999E 2000E 2001E 2002E Value (2) NPV
- --------------------------------- ------- ------- ------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cash Distributions $2.30 $2.40 $2.40 $2.50 $26.32
Period 0.50 1.50 2.50 3.50 4.00
- --------------------------------------------------------------------------------------------------------------------------------
NPV @ 9.50% $2.20 $2.09 $1.91 $1.82 $18.30 $26.33
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------
(1) Common Unit discount rate is a Dain Rauscher Wessels assumed yield based
upon the growth rate in distributions in the 15 year weather case.
(2) Terminal value is calculated as a perpetuity by dividing 2002E distribution
by the discount rate.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 15
<PAGE>
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Senior Subordinated Unit Reference Value Analysis
(15 Year Weather Case)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Senior Subordinated Unit Reference Value Analysis (15 Year Weather Case)
<TABLE>
<CAPTION>
15 Year Weather Case
-------------------------------------------------------------------------
Projected for the Year Ended September 30,
---------------------------------------------- Terminal Total
Senior Subordinated Unit Distributions 1999E 2000E 2001E 2002E Value (1) NPV
- ----------------------------------------------- ------- ------- ------- ------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Cash Distributions $2.30 $2.40 $2.40 $2.50 $22.73
Period 0.50 1.50 2.50 3.50 4.00
NPV@ 11.00% (150 bps spread to Common) $2.18 $2.05 $1.85 $1.74 $14.97 $22.79
Deferred Participation Unit (DPU)
- -----------------------------------------------
Cumulative Incremental DPU per Unit 0.000 0.084 0.167 0.251
Cash Distributions per Fractional Unit $0.00 $0.20 $0.40 $0.63 $4.82
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 13.00% (350 bps spread to Common) $0.00 $0.17 $0.30 $0.41 $2.96 $3.83
GP Incentive Distributions
- -----------------------------------------------
Cash Distributions $0.00 $0.00 $0.00 $0.05 $0.40
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 13.50% (400 bps spread to Common) $0.00 $0.00 $0.00 $0.03 $0.24 $0.28
- ---------------------------------------------------------------------------------------------------------------------------------
Total Net Present Value per Unit $2.18 $2.22 $2.14 $2.18 $18.17 $26.90
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------
(1) Terminal value is calculated as a perpetuity by dividing 2002E distribution
by the discount rate.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 16
<PAGE>
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Junior Subordinated/General Partner Unit Reference Value Analysis
(15 Year Weather Case)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Junior Subordinated/General Partner Unit Reference Value Analysis
(15 Year Weather Case)
<TABLE>
<CAPTION>
15 Year Weather Case
----------------------------------------------------------------------------------------
Projected for the Year Ended September 30, Terminal Total Liquidity Adjusted
-------------------------------------------
Junior Subordinated/GP Unit Distributions 1999E 2000E 2001E 2002E Value(1) NPV Discount (2) NPV
- ------------------------------------------- ----------- -------- -------- ---------- -------- ------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Distributions $2.30 $2.40 $2.40 $2.50 $20.83
Period 0.50 1.50 2.50 3.50 4.00
NPV @12.00% (260 bps spread to Common) $2.17 $2.02 $1.81 $1.68 $13.24 $20.93 17% $17.37
Deferred Participation Unit (DPU)
- -------------------------------------------
Cumulative Incremental DPU per Unit 0.000 0.084 0.167 0.251
Cash Distributions per Fractional Unit $0.00 $0.20 $0.40 $0.63 $4.82
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 13.00% (350 bps spread to Common) $0.00 $0.17 $0.30 $0.41 $2.96 $3.83 17% $3.18
GP Incentive Distributions
- -------------------------------------------
Cash Distributions $0.00 $0.00 $0.00 $0.05 $0.40
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 13.50% (400 bps spread to Common) $0.00 $0.00 $0.00 $0.03 $0.24 $0.28 17% $0.23
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Present Value per Unit $2.17 $2.19 $2.10 $2.13 $16.44 $25.04 17% $20.78
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------
(1) Terminal value is calculated as a perpetuity by dividing 2002E distribution
by the discount rate.
(2) The Junior Subordinated and General Partner Unit discount is determined by
using a 20% liquidity discount for both Units and a 10% control premium for
a General Partner Unit. The weighted average based upon pro forma Unit
ownership is a discount of 17%.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 17
<PAGE>
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Common Unit Reference Value Analysis
(30 Year Weather Case)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Common Unit Reference Value Analysis (30 Year Weather Case)
<TABLE>
<CAPTION>
30 Year Weather Case
----------------------------------------------------------------------
Projected for the Year Ended September 30
------------------------------------------- Terminal Total
Common Unit (1) 1999E 2000E 2001E 2002E Value (2) NPV
- ------------------------------------------ ------- ------- ------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Cash Distributions $2.30 $2.50 $2.70 $2.90 $32.22
Period 0.50 1.50 2.50 3.50 4.00
- ----------------------------------------------------------------------------------------------------------------------
NPV @ 9.00% $2.20 $2.20 $2.18 $2.14 $22.83 $31.55
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------
(1) Common Unit discount rate is a Dain Rauscher Wessets assumed yield based
upon the growth rate in distributions in the 30 year weather case.
(2) Terminal value is calculated as a perpetuity by dividing 2002E distribution
by the discount rate.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 18
<PAGE>
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Senior Subordinated Unit Reference Value Analysis
(30 Year Weather Case)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Senior Subordinated Unit Reference Value Analysis (30 Year Weather Case)
<TABLE>
<CAPTION>
30 Year Weather Case
----------------------------------------------------------------------------------------
Projected for the Year Ended September 30,
------------------------------------------------------- Terminal Total
Senior Subordinated Unit Distributions 1999E 2000E 2001E 2002E Value (1) NPV
- ----------------------------------------- ------- ------- ------- ------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Cash Distributions $2.30 $2.50 $2.70 $2.90 $29.74
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 9.75% (75 bps spread to Common) $2.20 $2.17 $2.14 $2.09 $20.50 $29.10
Deferred Participation Unit DPU
- -----------------------------------------
Cumulative Incremental DPU per Unit 0.000 0.084 0.167 0.251
Cash Distributions per Fractional Unit $0.00 $0.21 $0.45 $0.73 $5.82
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 12.50% (350 bps spread to Common) $0.00 $0.18 $0.34 $0.48 $3.63 $4.63
GP Incentive Distributions
- -----------------------------------------
Cash Distributions $0.00 $0.05 $0.18 $0.32 $2.46
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 13.00% (400 bps spread to Common) $0.00 $0.04 $0.13 $0.21 $1.51 $1.89
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Present Value per Unit $2.20 $2.39 $2.61 $2.78 $25.65 $35.62
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------
(1) Terminal value is calculated as a perpetuity by dividing 2002E distribution
by the discount rate.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 19
<PAGE>
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Junior Subordinated/General Partner Unit Reference Value Analysis
(30 Year Weather Case)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Junior Subordinated General Partner Unit Reference Value Analysis
(30 Year Weather Case)
<TABLE>
<CAPTION>
30 Year Weather Case
---------------------------------------------------------------------------------------
Projected for the Year Ended September 30,
------------------------------------------ Terminal Total Liquidity Adjusted
Junior Subordinated/GP Unit Distributions 1999E 2000E 2001E 2002E Value (1) NPV Discount (2) NPV
- ------------------------------------------- ------- ------- ------- ------- ----------- ------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Distributions $2.30 $2.50 $2.70 $2.90 $27.62
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 10.50% (150 bps spread to Common) $2.19 $2.15 $2.10 $2.04 $18.53 $27.01 17% $22.42
Deferred Participation Unit (DPU)
- -------------------------------------------
Cumulative Incremental DPU per Unit 0.000 0.084 0.167 0.251
Cash Distributions per Fractional Unit $0.00 $0.21 $0.45 $0.73 $5.82
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 12.50% (350 bps spread to Common) $0.00 $0.18 $0.34 $0.48 $3.63 $4.63 17% $3.84
GP incentive Distributions
- -------------------------------------------
Cash Distributions $0.00 $0.05 $0.18 $0.32 $2.48
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 13.00% (400 bps spread to Common) $0.00 $0.04 $0.13 $0.21 $1.51 $1.89 17% $1.57
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Present Value per Unit $2.19 $2.37 $2.57 $2.74 $23.67 $33.53 17% $27.83
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------
(1) Terminal value is calculated as a perpetuity by dividing 2002E distribution
by the discount rate.
(2) The Junior Subordinated and General Partner Unit discount is determined by
using a 20% liquidity discount for both Units and a 10% control premium for
a General Partner Unit. The weighted average based upon pro form a Unit
ownership is a discount of 17%.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 20
<PAGE>
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Common Unit Reference Value Analysis
(Dain Rauscher Wessels Case)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Common Unit Reference Value Analysis (Dain Rauscher Wessels Case)
<TABLE>
<CAPTION>
Dain Rauscher Wessels Case
-------------------------------------------------------------------------------------
Projected for the Year Ended September 30,
---------------------------------------------------- Terminal Total
Common Unit (1) 1999E 2000E 2001E 2002E Value (2) NPV
- ------------------------------ ------- ------- ------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cash Distributions $2.30 $2.30 $2.40 $2.40 $22.33
Period 0.50 1.50 2.50 3.50 4.00
- ------------------------------------------------------------------------------------------------------------------------
NPV @ 10.75% $2.19 $1.97 $1.86 $1.68 $14.84 $22.54
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------
Note: Dain Rauscher Wessels Case assumes distributions of $2.30, $2.30, $2.40
and $2.40 for the years 1999E, 2000E, 2001E and 2002E, respectively.
(1) Common Unit discount rate is a Dain Rauscher Wessels assumed yield based
upon the growth rate in distributions in the Dain Rauscher Wessels case.
(2) Terminal value is calculated as a perpetuity by dividing 2002E distribution
by the discount rate.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 21
<PAGE>
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Senior Subordinated Unit Reference Value Analysis
(Dain Rauscher Wessels Case)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Senior Subordinated Unit Reference Value Analysis (Dain Rauscher Wessels Case)
<TABLE>
<CAPTION>
Dain Rauscher Wessels Case
-------------------------------------------------------------------------
Projected for the Year Ended September 30,
---------------------------------------------- Terminal Total
Senior Subordinated Unit Distributions 1999E 2000E 2001E 2002E Value (1) NPV
- ------------------------------------------ ------- ------- ------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cash Distributions $2.30 $2.30 $2.40 $2.40 $19.20
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 12.50% (175 bps spread to Common) $2.17 $1.93 $1.79 $1.59 $11.99 $19.46
Deferred Participation Unit (DPU)
- ------------------------------------------
Cumulative Incremental DPU per Unit 0.000 0.084 0.167 0.251
Cash Distributions per Fractional Unit $0.00 $0.19 $0.40 $0.60 $4.23
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 14.25% (350 bps spread to Common) $0.00 $0.16 $0.29 $0.38 $2.48 $3.30
GP Incentive Distributions
- ------------------------------------------
Cash Distributions $0.00 $0.00 $0.00 $0.00 $0.00
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 14.75% (400 bps spread to Common) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
- -------------------------------------------------------------------------------------------------------------------------
Total Net Present Value per Unit $2.17 $2.09 $2.08 $1.97 $14.47 $22.76
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------
Note: Dain Rauscher Wessels Case assumes distributions of $2.30, $2.30, $2.40
and $2.40 for the years 1999E, 2000E, 2001E and 2002E, respectively.
(1) Terminal value is calculated as a perpetuity by dividing 2002E distribution
by the discount rate.
================================================================================
Dain Rauscher Wessels Page 22
<PAGE>
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Junior Subordinated/General Partner Unit Reference Value Analysis
(Dain Rauscher Wessels Case)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Junior Subordinated General Partner Unit Reference Value Analysis
(Dain Rauscher Wessels Case)
<TABLE>
<CAPTION>
Dain Rauscher Wessels Case
--------------------------------------------------------------------------------------
Projected for the Year Ended September 30,
------------------------------------------ Terminal Total Liquidity Adjusted
Junior Subordinated/GP Unit Distributions 1999E 2000E 2001E 2002E Value (1) NPV Discount (2) NPV
- ------------------------------------------ ------- ------- ------- ------- ----------- ------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Distributions $2.30 $2.30 $2.40 $2.40 $17.78
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 13.50% (276 bps spread to Common) $2.16 $1.90 $1.75 $1.54 $10.71 $18.06 17% $14.99
Deferred Participation Unit (DPU)
- ------------------------------------------
Cumulative Incremental DPU per Unit 0.000 0.084 0.167 0.251
Cash Distributions per Fractional Unit $0.00 $0.19 $0.40 $0.60 $4.23
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 14.26% (350 bps spread to Common) $0.00 $0.16 $0.29 $0.38 $2.48 $3.30 17% $2.74
GP Incentive Distributions
- ------------------------------------------
Cash Distributions $0.00 $0.00 $0.00 $0.00 $0.00
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 14.75% (400 bps spread to Common) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 17% $0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Present Value per Unit $2.16 $2.06 $2.04 $1.92 $13.19 $21.37 17% $17.73
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------
Note: Dain Rauscher Wessels Case assumes distributions of $2.30, $2.30, $2.40
and $240 for the years 1 999E, 2000E, 2001E and 2002E, respectively.
(1) Terminal value is calculated as a perpetuity by dividing 2002E distribution
by the discount rate.
(2) The Junior Subordinated and General Partner Unit discount is determined by
using a 20% liquidity discount for both Units and a 10% control premium for
a General Partner Unit. The weighted average based upon pro forma Unit
ownership is a discount of 17%.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 23
<PAGE>
[LOGO OF PETRO(TM) APPEAR HERE]
Project Intense Heat
================================================================================
Historical and Pro Forma
MVE and MVC Comparison
================================================================================
Dain Rauscher Wessels Page 24
<PAGE>
[LOGO OF PETRO(TM) APPEARS HERE]
Historical and Pro Forma MVE and MVC Comparison
Petro Historical and Pro Forma Adjusted MVE and MVC Summary
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Petro Historical and Pro Forma Adjusted Market Value of Equity
and Market Value of Capitalization Summary
(In thousands, except as otherwise indicated)
<TABLE>
<CAPTION>
Pro Forma Adjusted Market Value of Equity and
Market Value of Capitalization
Historical ----------------------------------------------
MVE & Common Sr Sub Jr Sub/GP Total Percent
Market Value of Equity MVC Units Units Units Units Change
- --------------------------------------------------------------- ---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Shares/Units Outstanding 26,573 -- 2,766 857 3,624
Valuation per Share/Unit (1) $1.875 $22,537 $22.762 $17.733
Market Value of Equity $49,824 -- $62,970 $15,199 $78,169 56.9%
Principal Amount of Debt estimated at 9/30/98 (pre-transaction)
- ---------------------------------------------------------------
11.96% Senior Notes $60,000 $60,000
14.10% Senior Notes 3,100 3,100
14.10% Subordinated Notes 3,100 3,100
10.13% Subordinated & Senior Subordinated Notes 50,000 50,000
9.38% Subordinated & Senior Subordinated Notes 75,000 75,000
12.25% Subordinated & Senior Subordinated Notes 81,250 81,250
8.00% Acq. & Other Notes 14,508 14,508
8.25% Existing Credit Facility 0 0
---------- ---------
Total Principal Amount of Debt $286,958 $286,958
Value of Preferred Stock estimated at 9/30/98 (2)
- ---------------------------------------------------------------
14.33% Preferred Stock $4,167 $4,167
12.88% Preferred Stock 30,000 27,600
---------- ---------
Total Liquidation Value of Preferred Stock $34,167 $31,767
Debt and Preferred Stock Exchange (Common Units Issued)
- ---------------------------------------------------------------
Common Units Issued in Exchange -- 104
Dain Rauscher Wessels Reference Value per Unit -- $22,537
Total Value of Units Issued -- $2,337 $2,337
Market Value of Capitalization
- ---------------------------------------------------------------
Total Value of Equity, Debt & Preferred $370,949 $399,231
Less: Excess Cash (pre-transaction) (20,000) (20,000)
---------- ---------
Market Value of Capitalization $350,949 $379,231 8.1%
========== =========
</TABLE>
- --------------------
(1) Petro historical value per share is the closing market price one day prior
to announcement and the Star pro forma value per Unit is based on the Unit
Reference Value Analysis (Dain Rauscher Wessels Case), [See Unit Reference
Value Analysis Summary on page 9].
(2) Petro value for Preferred Stock is liquidation value estimated at September
30, 1998, except pro forma value for the 12.88% Preferred, which is 92% of
liquidation value.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 25
<PAGE>
[LOGO OF PETRO(TM) APPEARS HERE]
Historical and Pro Forma MVE and MVC Comparison
Star Historical and Pro Forma Adjusted MVE and MVC Summary
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Star Historical and Pro Forma Adjusted Market Value of Equity and Market Value
of Capitalization Summary
(in thousands, except as otherwise indicated)
<TABLE>
<CAPTION>
Historical Market Value of Equity and
Market Value of Capitalization
----------------------------------------------------------------------
Common Sub Implied Total
Market Value of Equity Units Units GP Units Units
- ------------------------------------------ --------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Units Outstanding 3,832 2,396 127 6,355
Valuation per Unit (1) $21,063 $14,744 $18,956
Market Value of Equity $80,706 $35,327 $2,409 $118,442
Market Value of Capitalization
- ------------------------------------------
Market Value of Equity $118,442
Total Debt (2) 110,080
Less: Excess Cash (2) (501)
----------
Market Value of Capitalization $228,021
==========
<CAPTION>
Pro Forma Adjusted Market Value of Equity and
Market Value of Capitalization
-------------------------------------------------------------
Common Sr Sub Jr Sub/GP Total Percent
Market Value of Equity Units Units Units Units Change
- ------------------------------------------- --------- -------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Units Outstanding 10,311 2,766 857 13,934
Valuation per Unit (1) $22,537 $22,762 $17,733
Market Value of Equity $232,371 $62,970 $15,199 $310,540 162.2%
Market Value of Capitalization
- -------------------------------------------
Market Value of Equity $310,540
Total Debt (2) 314,234
Less: Excess Cash (2) (7,177)
----------
Market Value of Capitalization $617,597 170.9%
==========
</TABLE>
- ---------------------
(1) Star historical value per Common Unit is the closing market price one day
prior to announcement, the Star value per Subordinated Unit is the value of
a Common Unit less a 20% liquidity discount and a 10% subordination
discount. The value of an implied General Partner Unit is the value of a
Common Unit less a 20% liquidity discount plus a 10% control premium. The
value of each pro forma Star Unit is based on the Unit Reference Value
Analysis (Dain Rauscher Wessels Case).
(2) Total debt and excess cash for historical is based on the Star September
30, 1998 estimated balance sheet and for pro forma is based on the Star
September 30, 1998 pro forma balance sheet.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 26
<PAGE>
[LOGO OF PETRO(TM) APPEARS HERE]
Project Intense Heat
================================================================================
Discounted Cash Flow Analysis
================================================================================
Dain Rauscher Wessels Page 27
<PAGE>
[LOGO OF PETRO(TM) APPEARS HERE]
Discounted Cash Flow Analysis
Petro Stand-Alone Free Cash Flow Projections (Unlevered)
================================================================================
- --------------------------------------------------------------------------------
PETROLEUM HEAT AND POWER CO., INC.
Stand-Alone Free Cash Flow Projections (Unlevered)
(In thousands, except as otherwise indicated)
<TABLE>
<CAPTION>
Projected for the Year Ended September 30,
------------------------------------------------------------------------------
15 Year Weather Case
Estimated -------------------------------------------------------------
1998E 1999E 2000E 2001E 2002E
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Volume (gallons) 355,157 369,707 356,249 343,852 332,333
Sales $475,541 $490,828 $477,965 $466,187 $455,287
Cost of Sales 318,900 328,642 318,786 309,754 301,400
---------- ---------- ---------- ---------- ----------
Gross Profit 156,641 162,186 159,179 156,433 153,887
Operating Expenses 119,011 118,794 117,410 116,196 115,118
---------- ---------- ---------- ---------- ----------
Heating Oil EBITDA 37,630 43,392 41,769 40,237 38,769
MLP Distribution 5,684 2,788 2,981 3,266 3,576
---------- ---------- ---------- ---------- ----------
Total EBITDA 43,314 46,180 44,750 43,503 42,345
Depreciation and Amortization 28,710 23,500 19,500 15,500 11,500
---------- ---------- ---------- ---------- ----------
Pretax Income (Loss) 14,604 22,680 25,250 28,003 30,845
Income Tax Expense 500 500 500 500 500
---------- ---------- ---------- ---------- ----------
Net Income 14,104 22,180 24,750 27,503 30,345
Plus: Depreciation and Amortization 28,710 23,500 19,500 15,500 11,500
---------- ---------- ---------- ---------- ----------
Cash Flow $42,814 $45,680 $44,250 $43,003 $41,845
========== ========== ========== ========== ==========
Less: Maintenance Capex (2,776) (3,000) (3,000) (3,000) (3,000)
---------- ---------- ---------- ---------- ----------
Free Cash Flow $40,038 $42,680 $41,250 $40,003 $38,845
========== ========== ========== ========== ==========
<CAPTION>
Projected for the Year Ended September 30,
------------------------------------------------------------------------------
30 Year Weather Case
Estimated -------------------------------------------------------------
1998E 1999E 2000E 2001E 2002E
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Volume (gallons) 355,157 380,161 366,323 353,575 341,730
Sales $475,541 $504,120 $490,912 $478,817 $467,624
Cost of Sales 318,900 337,106 326,993 317,724 309,151
---------- ---------- ---------- ---------- ----------
Gross Profit 156,641 167,014 163,919 161,093 158,473
Operating Expenses 119,011 121,466 120,052 118,810 117,707
---------- ---------- ---------- ---------- ----------
Heating Oil EBITDA 37,630 45,548 43,867 42,283 40,766
MLP Distribution 5,684 4,436 5,008 5,570 5,577
---------- ---------- ---------- ---------- ----------
Total EBITDA 43,314 49,984 48,875 47,853 46,343
Depreciation and Amortization 28,710 23,500 19,500 15,500 11,500
---------- ---------- ---------- ---------- ----------
Pretax Income (Loss) 14,604 26,484 29,375 32,353 34,843
Income Tax Expense 500 500 500 500 500
---------- ---------- ---------- ---------- ----------
Net Income 14,104 25,984 28,875 31,853 34,343
Plus: Depreciation and Amortization 28,710 23,500 19,500 15,500 11,500
---------- ---------- ---------- ---------- ----------
Cash Flow $42,814 $49,484 $48,375 $47,353 $45,843
========== ========== ========== ========== ==========
Less: Maintenance Capex (2,776) (3,000) (3,000) (3,000) (3,000)
---------- ---------- ---------- ---------- ----------
Free Cash Flow $40,038 $46,484 $45,375 $44,353 $42,843
========== ========== ========== ========== ==========
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
Dain Rauscher Wessels Page 28
<PAGE>
[LOGO OF PETRO(TM) APPEARS HERE]
Discounted Cash Flow Analysis
Leveraged Weighted Average Cost of Capital Calculation
================================================================================
- --------------------------------------------------------------------------------
PETROLEUM HEAT AND POWER CO., INC.
Leveraged Weighted Average Cost of Capital Calculation
<TABLE>
<S> <C>
Risk Free Rate
--------
30-Year treasury bond yield (9/25/98) Risk Free Rate (Rf) 5.12%
--------
Expected Return on Equity Market
30-Year treasury bond yield (9/25/98) Rf 5.12%
Historical spread between equity returns and 30-year treasury bond yield (Ibbotson Associates) S 7.00%
--------
Expected Return on Equity Market (Rm) = Rf+S 12.12%
--------
Cost of Debt
Long-term debt interest rate (Petro Estimate) lr 12.00%
Corporate tax rate t 35.00%
--------
Cost of Debt (Cd) = lr*(1-t) 7.80%
--------
Unleveraged Beta
--------
Unleveraged beta (Dain Rauscher Wessels estimate) Unleveraged Beta (Ub) 1.25
--------
Leveraged Beta
Target long-term debt/total capitalization Td 60.00%
Target long-term equity/total capitalization Te 40.00%
Debt/equity ratio De 150.00%
--------
Leveraged Beta (B) = Ub*(1+(1-t)*De) 2.47
--------
Unleveraged Cost of Equity
Risk free rate Rf 5.12%
Expected return on equity market Rm 12.12%
Unleveraged beta Ub 1.25
--------
Unleveraged Cost of Equity = Rf+Ub(Rm-Rf) 13.87%
--------
Leveraged Cost of Equity
Risk free rate Rf 5.12%
Expected return on equity market Rm 12.12%
Leveraged beta B 2.47
--------
Leveraged Cost of Equity (Ceu) = Rf+B(Rm-Rf) 22.40%
--------
Leveraged Weighted Average Cost of Capital
Target long-term debt/total capitalization Td 60.00%
Target long-term equity/total capitalization Te 40.00%
Leveraged cost of equity Ceu 22.40%
Cost of debt Cd 7.80%
--------
Leveraged Weighted Average Cost of Capital (WACC) = (Td*Cd) + (Te*Ceu) 13.64%
--------
</TABLE>
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 29
<PAGE>
[LOGO OF PETRO(TM) APPEARS HERE]
Discounted Cash Flow Analysis
Petro Stand-Alone Discounted Cash Flow Analysis (15 Year Weather Case)
================================================================================
- --------------------------------------------------------------------------------
PETROLEUM HEAT AND POWER CO,. INC.
Stand-Alone Discounted Cash Flow Analysis (15 Year Weather Case)
(In thousands, except as otherwise Indicated)
<TABLE>
<CAPTION>
Terminal
Projected for the Year Ended September 30, Value Total
---------------------------------------------------------------- @ 7.5 x Enterprise
1998E (1) 1999E 2000E 2001E 2002E EBITDA Value
----------- ------- ------- ------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Unlevered Free Cash Flow $6,787 $42,680 $41,250 $40,003 $38,845 $317,588
Period 0.25 1.25 2.25 3.25 4.25 4.75
Discounted Cash Flow
- -----------------------------
@ 12.0% $6,597 $37,043 $31,966 $27,678 $23,997 $185,386 $312,667
@ 13.0% $6,583 $36,633 $31,333 $26,890 $23,107 $177,722 $302,268
- ---------------------------------------------------------------------------------------------------------------------------------
@ 14.0% $6,568 $36,232 $30,718 $26,131 $22,258 $170,438 $292,345
- ---------------------------------------------------------------------------------------------------------------------------------
@ 15.0% $6,554 $35,839 $30,120 $25,399 $21,447 $163,512 $282,871
@ 16.0% $6,540 $35,453 $29,539 $24,695 $20,672 $156,923 $273,822
<CAPTION>
Less: Total
Debt & Pref. Total
Plus: Total Equity
Working Equity Value Per
Capital (2) Value Share(3)
------------- --------- -----------
<S> <C> <C> <C>
Unlevered Free Cash Flow
Period
Discounted Cash Flow
- ----------------------------
@ 12.0% ($301,125) $11,542 $0.43
@ 13.0% ($301,125) $1,143 $0.04
- --------------------------------------------------------------------------------
@ 14.0% ($301,125) ($8,780) ($0.33)
- --------------------------------------------------------------------------------
@ 15.0% ($301,125) ($18,254) ($0.69)
@ 16.0% ($301,125) ($27,303) ($1.03)
</TABLE>
- -------------------
(1) 1998E results include only the last two quarters of the year.
(2) Total debt, preferred stock and working capital are estimated at
September 30, 1998.
(3) Per share numbers are based upon shares outstanding of 26,573.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 30
<PAGE>
[LOGO OF PETRO APPEARS HERE] DISCOUNTED CASH FLOW ANALYSIS
Petro Stand-ALone Discounted Cash Flow Analysis
(30 Year Weather Case)
================================================================================
- --------------------------------------------------------------------------------
PETROLEUM HEAT AND POWER CO., INC,
STAND-ALONE DISCOUNTED CASH FLOW ANALYSIS (30 YEAR WEATHER CASE)
(IN THOUSANDS, EXCEPT AS OTHERWISE INDICATED)
<TABLE>
<CAPTION>
LESS:TOTAL
TERMINAL DEBT & PREF TOTAL
VALUE TOTAL PLUS: TOTAL EQUITY
PROJECTED FOR THE YEAR ENDED SEPTEMBER 30, @ 7.5 X ENTERPRISE WORKING EQUITY VALUE PER
------------------------------------------------
1998E (1) 1999E 2000E 2001E 2002E EBITDA VALUE CAPITAL (2) VALUE SHARE(3)
-------- ------- ------- ------- ------- -------- ---------- ----------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UNLEVERED FREE CASH FLOW $6,787 $46,375 $45,375 $44,353 $42,843 $347,573
PERIOD 0.25 1.25 2.25 3.25 4.25 4.75
Discounted Cash flow
- --------------------
@ 12.0% $6,597 $40,344 $35,162 $30,688 $26,467 $202,890 $342,148 ($301,125) $41,023 $1.54
@ 13.0% $6,583 $39,898 $34,466 $29,814 $25,486 $194,501 $330,748 ($301,125) $29,623 $1.11
- ----------------------------------------------------------------------------------------------------------------------------------
@ 14.0% $6,568 $39,461 $33,789 $28,972 $24,549 $186,529 $319,870 ($301,125) $18,745 $0.71
- ----------------------------------------------------------------------------------------------------------------------------------
@ 15.0% $6,554 $39,033 $33,132 $28,161 $23,655 $178,950 $309,484 ($301,125) $ 8,359 $0.31
@ 16.0% $6,540 $38,613 $32,493 $27,380 $22,800 $171,739 $299,565 ($301,125) ($ 1,560) ($0.06)
</TABLE>
____________________
(1) 1998E results include only the last two quarters of the year.
(2) Total debt, preferred stock and working capital are estimated at September
30, 1998.
(3) Per share numbers are based upon shares outstanding of 26,573.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 31
<PAGE>
[LOGO OF PETRO APPEARS HERE] DISCOUNTED CASH FLOW ANALYSIS
Stand-Alone Discounted Cash Flow Analysis Matrix
================================================================================
- --------------------------------------------------------------------------------
PETROLEUM HEAT AND POWER CO., INC.
STAND-ALONE DISCOUNTED CASH FLOW ANALYSIS MATRIX
(IN THOUSANDS, EXCEPT AS OTHERWISE INDICATED)
<TABLE>
<CAPTION>
TERMINAL VALUE MULTIPLES (EBITDA)
--------------------------------------------------------------------------
15 YEAR WEATHER CASE 30 YEAR WEATHER CASE
------------------------------------ ------------------------------------
DISCOUNTED CASH FLOW 6.5X 7.5X 8.5X 6.5X 7.5X 8.5X
- ------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
@ 12.0% ($0.50) $0.43 $1.36 $0.53 $1.54 $2.56
@ 13.0% ($0.85) $0.04 $0.93 $0.14 $1.11 $2.09
- --------------------------------------------------------------------------------------------------------------
@ 14.0% ($1.19) ($0.33) $0.52 ($0.23) $0.71 $1.64
- --------------------------------------------------------------------------------------------------------------
@ 15.0% ($1.51) ($0.69) $0.13 ($0.58) $0.31 $1.21
@ 16.0% ($1.81) ($1.03) ($0.24) ($0.92) ($0.06) $0.80
</TABLE>
__________
Note: Per share numbers are based upon shares outstanding of 26,573.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 32
<PAGE>
[LOGO OF PETRO APPEARS HERE] PROJECT INTENSE HEAT
================================================================================
RELATIVE CONTRIBUTION ANALYSIS
- --------------------------------------------------------------------------------
Page 33
<PAGE>
[LOGO OF PETRO APPEARS HERE] RELATIVE CONTRIBUTION ANALYSIS
(Not Adjusted for Pro Forma Unit Class Value
Difference)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
RELATIVE CONTRIBUTION ANALYSIS (NOT ADJUSTED FOR PRO FORMA
UNIT CLASS VALUE DIFFERENCE)
(in thousands, except as otherwise indicated)
<TABLE>
<CAPTION>
Projected for the Year Ended September 30,
--------------------------------------------------------
Normalized 16 Yr. Weather
Star Stand-Alone Distributable Cash FLow 1998E 1999E
- ---------------------------------------------- -------------- --------------
<S> <C> <C>
EBITDA $ 20,731 $ 23,032
Interest Expense (7,662) (8,538)
Maintenance Capex (2,710) (2,657)
Other (25) (25)
-------------- --------------
Distributable Cash Flow $ 10,334 $ 11,812
Distribution to Star Common
- ----------------------------------------------
Cash Distribution to Star Common Units $ 8,430 $ 8,430
Distribution per Common Unit $ 2.20 $ 2.20
Weighted Avg. Star Common Units Outstanding $ 3,832 3,632
Distribution to Star Sub Units (Petro)
- ----------------------------------------------
Cash Distribution to Star Sub Units $ 1,904 $ 3,362
Weighted Avg. Star Sub Units outstanding 2,396 2,396
Cash Distribution per Star Sub Unit $ 0.79 $ 1.41
Petro Distributable Cash Flow
- ----------------------------------------------
EBITDA $ 44,749 $ 46,094
Pro Forma Synergies 500 500
Preferred Dividends (5,026) (4,432)
Interest Expense (31,444) (30,971)
Maintenance Capex (2,776) (3,000)
Taxes (500) (500)
-------------- --------------
Distributable Cash Flow $ 5,503 $ 7,691
Cash Distribution to Star Sub Units 1,904 3,382
-------------- --------------
Total Distribution Cash Flow $ 7,407 $ 11,073
============== ==============
Star Pro Forma Units Outstanding
- ----------------------------------------------
Star 3,832 3,832
Petro 3,624 3,624
-------------- --------------
Total Units 7,455 7,455
Star Relative Contribution
- ----------------------------------------------
Distributable Cash Flow Contribution 53.2% 43.2%
Percent of Pro Forma Units Received 51.4% 51.4%
Petro Relative Contribution
- ----------------------------------------------
Distributable Cash Flow Contribution 46.8% 56.8%
Percent of Pro Forma Units Received 48.6% 48.6%
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 34
<PAGE>
[LOGO OF PETRO APPEARS HERE] RELATIVE CONTRIBUTION ANALYSIS
(Adjusted for Pro Forma Unit Class Value Difference)
================================================================================
<TABLE>
<CAPTION>
PROJECT INTENSE HEAT
Relative Contribution Analysis (Adjusted for Pro Forma Unit Class Value Difference)
(In thousands, except as otherwise Indicated)
Projected for the Year Ended September 30,
-----------------------------------------------------
Normalized 15 Yr. Weather
Star Stand-ALone Distributable Cash Flow 1998E 1998E
- ------------------------------------------------------- --------------- ------------------
<S> <C> <C>
EBITDA $20,731 $ 23,032
Interest Expense (7,662) (8,538)
Maintenance Capex (2,710) (2,657)
Other (25) (25)
-------------- ------------------
Distributable Cash Flow $10,334 $ 11,812
Distribution to Star Commmon
- -------------------------------------------------------
Cash Distribution to Star Common Units $ 8,430 $ 8,430
Distribution per Common Unit $ 2.20 $ 2.20
Weighted Avg. Star Common Units Outstanding $ 3,832 $ 3,832
Distribution to Star Sub Units (Petro)
- -------------------------------------------------------
Cash Distribution to Star Sub Units $ 1,904 $ 3,382
Weighted Avg. Star Sub Units Outstanding $ 2,398 $ 2,398
Cash Distribution per Star Sub Unit $ 0.79 $ 1.41
Petro Distributable Cash Flow
- -------------------------------------------------------
EBITDA $44,749 $ 48,094
Pro Forma Synergies 500 500
Preferred Dividends (5,028) (4,432)
Interest Expense (31,444) (30,971)
Maintenance Capex (2,778) (3,000)
Taxes (500) (500)
--------------- ------------------
Distributable Cash Flow $ 5,503 $ 7,691
Cash Distribution to Star Sub Units 1,904 3,382
--------------- ------------------
Total Distributable Cash Flow $ 7,407 $ 11,079
=============== ==================
Pro Forma Unit Class Value Adjustment
- -------------------------------------------------------
Pro Forma Senior Subordinated Units 2,766 2,766
Senior Subordinated / Common Unit Value Ratio (1) 1.01 1.01
Adjusted Senior Subordinated Units 2,794 2,794
Pro Forma Junior Subordinated & GP Units 857 857
Junior Subordinated & GP / Common Unit Value Ratio (1) 0.79 0.79
Adjusted Junior Subordinated & GP Units 674 674
Total Star Units Received by Petro (Value Adjusted) 3,468 3,468
Star Pro Forma Units Outstanding
- -------------------------------------------------------
Star 3,832 3,832
Petro (Adjusted) 3,468 3,468
--------------- ------------------
Total Units 7,900 7,300
Star Relative Contribution
- -------------------------------------------------------
Distributable Cash Flow Contribution 53.2% 43.2%
Percent of Pro Forma B Units Received 52.5% 52.5%
Petro Relative Contribution
- -------------------------------------------------------
Distributable Cash Flow Contribution 48.8% 58.8%
Percent of Pro Forma Units Received 47.5% 47.5%
</TABLE>
_________________
(1) Value ratio is based on the Dain Rauscher Wessels Case.
- --------------------------------------------------------------------------------
Page 35
<PAGE>
[LOGO PETRO APPEARS HERE] PROJECT INTENSE HEAT
================================================================================
NET ASSET VALUE ANALYSIS
- --------------------------------------------------------------------------------
Page 36
<PAGE>
[LOGO OF PETRO APPEARS HERE] NET ASSET VALUE ANALYSIS
Home Heating Oil Business Valuation
================================================================================
------------------------------------------------------------------------------
PETROLEUM HEAT AND POWER CO., INC.
Home Heating Oil Business Valuation
(in thousands, except as otherwise indicated)
<TABLE>
<CAPTION>
Method 1 Method 2
- ------------------------------------------------- ------------------------------------------------
<S> <C> <C> <C>
Petro 1998E Normalized EBITDA (1) $ 44,749 Petro 1998E Normalized Gallons 384,390
Mean EBITDA Multiple 4.2x Mean Acquisition Cost per Gallon $ 0.84
Total Enterprise Value $187,946 Total Enterprise Value $ 322,888
Petro Size Premium 10.0% Petro Size Premium 10.0%
Total Adjusted Enterprise Value $206,740 Total Adjusted Enterprise Value $ 355,176
Methodology Petro Methodology Petro
Acquisitions Acquisitions
1996-1997 1996-1997
Ten Largest Ten Largest
<CAPTION>
Method 3 Method 4
- ------------------------------------------------- ------------------------------------------------
<S> <C> <C> <C>
Petro 1998E Forecasted Customers 335,000 Petro 1998E Normalized EBITDA (1) $ 44,749
Mean Acquisition Cost per Customer $ 1,194 Mean EBITDA Multiple 6.1x
Total Enterprise Value $399,990 Total Enterprise Value $272,969
Petro Size Premium 10.0% Petro Size Premium 10.0%
Total Adjusted Enterprise Value $439,989 Total Adjusted Enterprise Value $300,266
Methodology Petro Methodology Star Gas
Acquisitions Acquisitions
1996-1997 1994-1998
Ten Largest
<CAPTION>
Method 5 Method 6
- ------------------------------------------------- -------------------------------------------------
<S> <C> <C> <C>
Petro LTM 6/30/98 EBITDA (1) $ 30,186 Petro LTM 6/30/98 EBITDA (1) $ 30,186
Mean EBITDA Multiple 11.4x Consolidator Growth Rate Factor 66.3
Total Enterprise Value $344,120 Petro EBITDA CAGR (2) 6.6%
Implied EBITDA Multiple 4.4x
Total Enterprise Value $132,818
Methodology Selected Energy Methodology Selected
Marketing & Industry
Distribution Consolidators
M&A Analysis
</TABLE>
_________________
(1)Excludes Star Gas distributions.
(2)Petro EBITDA compound annual growth rate (CAGR) from 1999E to 2002E, assuming
15 year weather and $25.0 million of acquisitions per year.
- --------------------------------------------------------------------------------
________________________________________________________________________________
Page 37
<PAGE>
[LOGO OF PETRO APPEARS HERE] NET ASSET VALUE ANALYSIS
NET ASSET VALUE SUMMARY
================================================================================
- --------------------------------------------------------------------------------
PETROLEUM HEAT AND POWER CO., INC.
NET ASSET VALUE SUMMARY
(In thousands, except as otherwise indicated)
<TABLE>
<CAPTION>
HOME HEATING OIL BUSINESS METHOD 1 METHOD 2 METHOD 3 METHOD 4 METHOD 5 METHOD 6
- --------------------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total Enterprise Value (See Previous Page) $ 206,740 $ 355,176 $ 439,989 $ 300,266 $ 344,120 $ 132,818
INVESTMENT IN STAR
- ---------------------------------------------------------
Total Subordinated Units 2,396 2,396 2,396 2,396 2,396 2,396
Implied OP Units 127 127 127 127 127 127
Total Implied Units 2,523 2,523 2,523 2,523 2,523 5,523
Common Unit Price (one day prior to announcement) $ 21,063 $ 21,063 $ 21,063 $ 21,063 $ 21,063 $ 21,063
Structural Subordination Discount 15% 15% 15% 15% 15% 15%
Value per Unit $ 17.90 $ 17.90 $ 17.90 $ 17.90 $ 17.90 $ 17.90
Total Value of Investment in Star $ 45,173 $ 45,173 $ 45,173 $ 45,173 $ 45,173 $ 45,173
GROSS ASSET VALUE $ 251,913 $ 400,349 $ 485,162 $ 345,439 $ 389,293 $ 177,991
PRINCIPAL AMOUNT OF DEBT ESTIMATED AT 9/30/98
- ---------------------------------------------------------
11.96% Senior Notes $ 60,000 $ 60,000 $ 60,000 $ 60,000 $ 60,000 $ 60,000
14.10% Senior Notes 3,100 3,100 3,100 3,100 3,100 3,100
14.10% Subordinated Notes 3,100 3,100 3,100 3,100 3,100 3,100
10.13% Subordinated & Senior Subordinated Notes 50,000 50,000 50,000 50,000 50,000 50,000
9.38% Subordinated & Senior Subordinated Notes 75,000 75,000 75,000 75,000 75,000 75,000
12.25% Subordinated & Senior Subordinated Notes 81,250 81,250 81,250 81,250 81,250 81,250
8.00% Acq. & Other Notes 14,508 14,508 14,508 14,508 14,508 14,508
8.25% Existing Credit Facility 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ----------
Total Principal Amount of Debt $ 286,958 $ 286,958 $ 286,958 $ 286,958 $ 286,958 $ 286,958
LIQUIDATION VALUE OF PREFERRED STOCK ESTIMATED AT 9/30/98
- ---------------------------------------------------------
14.33% Preferred Stock $ 4,167 $ 4,167 $ 4,167 $ 4,167 $ 4,167 $ 4,167
12.88% Preferred Stock 30,000 30,000 30,000 30,000 30,000 30,000
---------- ---------- ---------- ---------- ---------- ----------
Total Liquidation Value of Preferred Stock $ 34,167 $ 34,167 $ 34,167 $ 34,167 $ 34,167 $ 34,167
PREPAYMENT PENALTIES & OTHER LIABILITIES
- ---------------------------------------------------------
Prepayment Penalties on Outstanding Debt (1) $ 22,957 $ 22,957 $ 22,957 $ 22,957 $ 22,957 $ 22,957
Other Long-Term Liabilities 10,711 10,711 10,711 10,711 10,711 10,711
Working Capital & Cash Escrow Adjustment (20,000) (20,000) (20,000) (20,000) (20,000) (20,000)
Liquidation Transaction Costs 5,000 5,000 5,000 5,000 5,000 5,000
---------- ---------- ---------- ---------- ---------- ----------
Total Prepayment Penalties & Other Liabilities $ 18,668 $ 18,668 $ 18,668 $ 18,668 $ 18,668 $ 18,668
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE ($87,880) $ 60,556 $ 145,369 $ 5,646 $ 49,500 ($161,802)
========== ========== ========== ========== ========== ==========
NET ASSET VALUE PER SHARE ($3.31) $ 2.28 $ 5.47 $ 0.21 $ 1.86 ($6.09)
========== ========== ========== ========== ========== ==========
TOTAL SHARES OUTSTANDING 26,573 26,573 26,573 26,573 26,573 26,573
</TABLE>
___________
(1) Assumes all debt is prepaid at 108% of par.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 38
<PAGE>
[LOGO OF PETRO APPEARS HERE] PROJECT INTENSE HEAT
================================================================================
COMPARABLE COMPANY TRADING ANALYSIS
Energy and Fuel Marketing and Distribution Companies
- --------------------------------------------------------------------------------
Page 39
<PAGE>
[LOGO OF PETRO APPEARS HERE] ENERGY AND FUEL MARKETING AND DISTRIBUTION
COMPANIES
Market Value of Equity to Latest Twelve Months Net
Income from Operations
================================================================================
[GRAPH APPEARS HERE]
___________
Note: Market data as of 9/25/98.
Source: Factset Data Systems and publicly available information.
(1) Market value of equity for Petro is calculated using the closing market
price one day prior to announcement.
- --------------------------------------------------------------------------------
Page 40
<PAGE>
[LOGO OF PETRO APPEARS HERE] ENERGY AND FUEL MARKETING AND DISTRIBUTION
COMPANIES
Market Value of Equity to Latest Twelve Months
Cash Flow
================================================================================
[GRAPH APPEARS HERE]
__________________
Note: Market data as of 9/25/98.
Source: Factset Data Systems and publicly available information.
(1) Market value of equity for Petro is calculated using the closing market
price one day prior to announcement.
- --------------------------------------------------------------------------------
Page 41
<PAGE>
[LOGO OF PETRO APPEARS HERE] ENERGY AND FUEL MARKETING AND DISTRIBUTION
COMPANIES Price to Book Value per Common Share
================================================================================
[GRAPH APPEARS HERE]
____________
Note: Market data as of 9/25/98.
Source: Factset Data Systems and publicly available information.
- --------------------------------------------------------------------------------
Page 42
<PAGE>
[LOGO OF PETRO APPEARS HERE] ENERGY AND FUEL MARKETING AND DISTRIBUTION
COMPANIES
Market Value of Capitalization to Latest Twelve
Months Revenues
================================================================================
[GRAPH APPEARS HERE]
_____________
Note: Market data as of 9/25/98.
Source: Factset Data Systems and publicly available information.
(1) Market value of capitalization for Petro is calculated using the closing
market price one day prior to announcement.
- --------------------------------------------------------------------------------
Page 43
<PAGE>
[LOGO OF PETRO APPEARS HERE] ENERGY AND FUEL MARKETING AND DISTRIBUTION
COMPANIES
Market Value of Capitalization to Latest Twelve
Months EBITDA
================================================================================
[GRAPH APPEARS HERE]
__________
Note: Market data as of 9/25/98.
Source: Factset Data Systems and publicly available information.
(1) Market value of capitalization for Petro is calculated using the closing
market price one day prior to announcement. Petro latest twelve months
EBITDA includes Star Gas distributions and excludes non-recurring expenses.
- --------------------------------------------------------------------------------
Page 44
<PAGE>
[LOGO OF PETRO APPEARS HERE] ENERGY AND FUEL MARKETING AND DISTRIBUTION
COMPANIES
Market Value of Capitalization to Latest Twelve
Months EBIT
================================================================================
[GRAPH APPEARS HERE]
_________
Note: Market data as of 9/25/98.
Source: Factset Data Systems and publicly available information.
(1) Market value of capitalization for Petro is calculated using the closing
market price one day prior to announcement.
- --------------------------------------------------------------------------------
Page 45
<PAGE>
[LOGO OF PETRO APPEARS HERE] PROJECT INTENSE HEAT
================================================================================
COMPARABLE COMPANY TRADING ANALYSIS
Propane Master Limited Partnerships
- --------------------------------------------------------------------------------
Page 46
<PAGE>
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Percentage of 52 Week High Common Unit Price
================================================================================
[GRAPH APPEARS HERE]
__________
Note: Market data as of 9/25/98.
Source: Factset Data Systems.
(1) Percentage of 52 week high one day prior to announcement of merger on August
13, 1998.
- --------------------------------------------------------------------------------
Page 47
<PAGE>
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Current Yield
================================================================================
[GRAPH APPEARS HERE]
____________
Note: Market data as of 9/25/98.
Source: Factset Data Systems and publicly available information.
(1) Star Gas yield based on annual distribution of $2.20 per Unit.
________________________________________________________________________________
Page 48
<PAGE>
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Historical Yields
[GRAPH APPEARS HERE]
________
Source: Factset Data Systems and publicly available information.
- --------------------------------------------------------------------------------
Page 49
<PAGE>
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Historical Yields vs. 10-Year Treasury
================================================================================
[GRAPH APPEARS HERE]
___________
Source: Factset Data Systems and publicly available information.
(1) Peer group includes Amerigas Partners, Cornerstone Propane Partners,
Ferrellgas Partners, Heritage Propane Partners and Suburban Propane Partners
and excludes National Propane Partners.
- --------------------------------------------------------------------------------
Page 50
<PAGE>
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Yield Spread To Treasury
================================================================================
[GRAPH APPEARS HERE]
_________________
Source: Factset Data Systems and publicly available information.
(1) Peer group includes Amerigas Partners, Cornerstone Propane Partners,
Ferrellgas Partners, Heritage Propane Partners and Suburban Propane Partners
and excludes National Propane Partners.
________________________________________________________________________________
Page 51
<PAGE>
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Adjusted Market Value of Capitalization/(1)/
================================================================================
[GRAPH APPEARS HERE]
________________________
Note: Market data as of 9/25/98.
Source: Factset Data Systems, publicly available information and Petroleum Heat
and Power Co., Inc.
(1) Adjusted Market Value of Capitalization (MVC) is defined as adjusted market
value of equity (common units multiplied by current common unit price, plus
subordinated units multiplied by current common unit price less a 20%
liquidity discount and a 10% subordination discount, plus implied GP units
multiplied by current common unit price less a 20% liquidity discount plus a
10% control premium) plus book value of total debt, less cash and
equivalents in excess of a 1.0 working capital ratio.
(2) Adjusted MVC for Star Gas historical is calculated based upon the definition
above using the closing market price one day prior to announcement. The
adjusted MVC for Star Gas pro forma is based upon the Unit Reference Value
Analysis (Dain Rauscher Wessels Case), [See Unit Reference Value Analysis on
page 9].
- --------------------------------------------------------------------------------
Dain Rauscher Wessels Page 52
<PAGE>
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Adjusted Market Value of Capitalization/(1)/ to
Latest Twelve Months EBITDA
================================================================================
[GRAPH APPEARS HERE]
___________________
Note: Market data as of 9/25/98.
Source: Factset Data Systems and publicly available information.
(1) Adjusted Market Value of Capitalization (MVC) is defined as adjusted market
value of equity (common units multiplied by current common unit price, plus
subordinated units multiplied by current common unit price less a 20%
liquidity discount and a 10% subordination discount, plus implied GP units
multiplied by current common unit price less a 20% liquidity discount plus a
10% control premium) plus book value of total debt, less cash and
equivalents in excess of a 1.0 working capital ratio.
(2) Adjusted MVC for Star Gas is calculated based upon the definition above
using the closing market price one day prior to announcement.
- --------------------------------------------------------------------------------
Page 53
<PAGE>
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Adjusted Market Value of Equity/(1)/ to Latest
Twelve Months Flow from Operations
================================================================================
[GRAPH APPEARS HERE]
_______________
Note: Market data as of 9/25/98.
Source: Factset Data Systems and publicly available information.
(1) Adjusted Market Value of Equity (MVE) is defined common units multiplied by
current common unit price, plus subordinated units multiplied by current
common unit price less a 20% liquidity discount and a 10% subordination
discount, plus implied GP units multiplied by current common unit price less
a 20% liquidity discount plus a 10% control premium.
(2) Adjusted MVE for Star Gas is calculated based upon the definition above
using the closing market price one day prior to announcement.
- --------------------------------------------------------------------------------
Page 54
<PAGE>
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Total Debt to Adjusted Market Value of
Capitalization/(1)/
================================================================================
[GRAPH APPEARS HERE]
_____________
Note: Market data as of 9/25/98.
Source: Factset Data Systems, publicly available information and Petroleum Heat
and Power Co., Inc.
(1) Adjusted Market Value of Capitalization (MVC) is defined as adjusted market
value of equity (common units multiplied by current common unit price, plus
subordinated units multiplied by current common unit price less a 20%
liquidity discount and a 10% subordinated discount, plus implied GP units
multiplied by current common unit price less a 20% liquidity discount plus a
10% control premium) plus book value of total debt, less cash and
equivalents in excess of a 1.0 working capital ratio.
(2) Adjusted MVC for Star Gas historical is calculated based upon the definition
above using the closing market price one day prior to announcement. The
adjusted MVC for Star Gas pro forma is based upon the Unit Reference Value
Analysis (Dain Rauscher Wessels Case). [See Unit Reference Value Analysis on
page 9].
- --------------------------------------------------------------------------------
Page 55
<PAGE>
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Total Debt to Total Book Capitalization
================================================================================
[GRAPH APPEARS HERE]
___________
Source: Publicly available information and Petroleum Heat and Power Co., Inc.
(1) Pro forma total debt to total book capitalization for Star Gas is estimated
at September 30, 1998.
- --------------------------------------------------------------------------------
Page 56
<PAGE>
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Latest Twelve Months EBITDA to Interest Expense
(Interest Coverage)
================================================================================
[GRAPH APPEARS HERE]
______________
Source: Publicly available information and Petroleum Heat and Power Co., Inc.
(1) Pro forma EBITDA to interest expense for Star Gas is estimated for the year
ended September 30, 1998.
- --------------------------------------------------------------------------------
Page 57
<PAGE>
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Total Debt to Latest Twelve Months EBITDA
================================================================================
[GRAPH APPEARS HERE]
______________
Source: Publicly available information and Petroleum Heat and Power Co., Inc.
(1) Pro forma total debt to EBITDA for Star Gas is estimated at and for the year
ended September 30, 1998.
- -------------------------------------------------------------------------------
Page 58
<PAGE>
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Latest Twelve Months Profitability Margins
================================================================================
[GRAPH APPEARS HERE]
______________
Source: Publicly available information.
- --------------------------------------------------------------------------------
Page 59
<PAGE>
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Latest Twelve Months Retail Gallons
================================================================================
[GRAPH APPEARS HERE]
________________
Source: Publicly available information.
- --------------------------------------------------------------------------------
Page 60
<PAGE>
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Latest Twelve Months Sales Percentage by Customer
Type
================================================================================
[GRAPHS APPEARS HERE]
______________
Source: Publicly available information
- --------------------------------------------------------------------------------
Page 61
<PAGE>
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Latest Twelve Months Operating Results per Retail
Gallon
================================================================================
[GRAPH APPEARS HERE]
_______________
Source: Publicly available information
- --------------------------------------------------------------------------------
Page 62
<PAGE>
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Latest Twelve Months Operating Results per Branch
================================================================================
[GRAPH APPEARS HERE]
___________
Source: Publicly available information.
- --------------------------------------------------------------------------------
Page 63
<PAGE>
[LOGO OF PETRO APPEARS HERE] PROJECT INTENSE HEAT
================================================================================
COMPARABLE TRANSACTIONS ANALYSIS
- --------------------------------------------------------------------------------
Page 64
<PAGE>
[LOGO OF PETRO APPEARS HERE] COMPARABLE TRANSACTIONS ANALYSIS
Selected Energy Marketing & Distribution Merger &
Acquisition Transactions
(1994 - Present)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
SELECTED ENERGY MARKETING & DISTRIBUTION MERGER & ACQUISITION TRANSACTIONS
(1994 - PRESENT)
<TABLE>
<CAPTION>
TRANSACTION TRANSACTION
ENTERPRISE ENTERPRISE
DATE VALUE (1) VALUE/LTM
EFFECTIVE ACQUIROR NAME TARGET NAME ($ MIL.) EBITDA
- ------------- ------------------------------------ --------------------------------------- ----------- -----------
<S> <C> <C> <C> <C>
05/31/94 Valero Energy Corporation Valero Natural Gas Partners, LP. $ 665.6 14.6x
07/01/94 Associated Natural Gas Corporation Grand Valley Gas Company 53.8 7.3x
07/13/94 K N Energy, Inc. American Oil and Gas Company 410.9 10.9x
12/15/94 Panhandle Eastern Corp. Associated Natural Gas Corporation 750.7 9.6x
03/14/95 Natural Gas Clearinghouse Trident NGL Holding, Inc. 719.3 9.8x
06/15/95 LG&E Energy Corporation Hadson Corporation 143.0 11.9x
08/05/97 El Paso Natural Gas Company Eastex Energy, Inc. 35.6 NM
04/15/97 PacifiCorp Holdings, Inc. TPC Corporation 388.7 13.4x
11/18/97 Enron Corp. Enron Global Power & Pipelines L.L.C. 829.1 14.3x
03/06/98 Kinder Morgan Energy Partners, LP. Santa Fe Pacific Pipeline Partners, L.P. 1,464.9 10.9x
-----------------------------------------------------------------------
MEAN $ 566.2 11.4x
MEDIAN 565.1 10.9x
HIGH 1,464.9 14.6x
LOW 35.6 7.3x
-----------------------------------------------------------------------
PENDING STAR GAS PARTNERS, L.P. PETROLEUM HEAT AND POWER CO., INC. (2) $ 379.2 10.6x
<CAPTION>
TRANSACTION TRANSACTION
TRANSACTION TRANSACTION EQUITY EQUITY
ENTERPRISE EQUITY VALUE/ VALUE/
DATE VALUE/LTM VALUE LTM NET LATEST
EFFECTIVE EBIT ($ MIL.) INCOME BOOK VALUE
- ------------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
05/31/94 21.4x $ 230.4 55.3x 4.3x
07/01/94 10.9x 56.7 26.5x 3.5x
07/13/94 20.5x 302.1 54.8x 1.6x
12/15/94 15.2x 577.5 19.5x 2.8x
03/14/95 18.2x 333.7 50.3x 1.4x
06/15/95 NM 143.0 NM NM
08/05/95 NM 34.2 NM 2.2x
04/15/97 23.3x 241.4 47.9x 2.5x
11/18/97 14.3x 865.3 15.4x 2.5x
03/06/98 13.0x 1,163.1 21.3x 4.3x
-----------------------------------------------------------
17.1x $ 394.7 36.4x 2.8x
16.7x 271.8 37.2x 2.5x
23.3x 1,163.1 55.3x 4.3x
10.9x 34.2 15.4x 1.4x
-----------------------------------------------------------
PENDING NM $ 78.2 NM NM
-----------------------------------------------------------
</TABLE>
________________
Source: Securities Data Company, publicly available information and Petroleum
Heat and Power Co., Inc.
(1) Transaction Enterprise Value is defined as common equity purchase price
plus total debt and preferred stock, less cash and equivalents, excluding
fees and expenses. The stock is valued using the closing price on the last
full trading day prior to announcement.
(2) Petro market value of capitalization and market value of equity are based
on the Unit Reference Value Analysis (Dain Rauscher Wessels Case). (See
Unit Reference Value Analysis Summary on page 9). LTM EBITDA includes Star
Gas distributions and excludes non-recurring expenses.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 65
<PAGE>
[LOGO OF PETRO APPEARS HERE] COMPARABLE TRANSACTIONS ANALYSIS
Petro Acquisitions Summary
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Petro Acquisitions Summary
(Dollar and gallon amounts in thousands, except per gallon and
per customer amounts)
<TABLE>
<CAPTION>
Mean Mean
Total Total Target LTM EBITDA Total Acquisition Total Acquisition
----------------------
Companies Acquisition Mean Gallons Cost Customers Cost
Petro 1996 - 1997 Acquisitions Acquired Costs EBITDA Multiple Acquired per Gallon Acquired per Customer
------------------------------ --------- ----------- --------- --------- -------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ten Largest 10 $ 33,465 $ 7,848 4.2 x 40,446 $ 0.84 31,358 $ 1,194
Excluding Ten Largest 14 8,629 2,064 4.1 x 13,730 0.55 14,224 630
Petroleum Heat and Power Co., Inc.
----------------------------------------------------------------------------------------------------------------------------------
Normalized 1998E EBITDA $334,058 (1) $44,749 (2) 7.5 x 384,390 $ 0.87 335,000 $ 997
LTM 6/30/98 EBITDA 334,058 (1) 30,186 (2) 11.1 x
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
_______________
Source: Petroleum Heat and Power Co., Inc.
(1) Acquisition cost is based on the Pro Forma Market Value of Capitalization
Analysis (Dain Rauscher Wessels Case), (See Petro Historical and Pro
Forma MVE and MVC Summary on page 25) less Petro's investment in Star.
The value of Petro's investment in Star is the closing market price of a
Star Common Unit one day prior to announcement less a structural
subordination discount of 15% multiplied by Petro's total implied Star
units.
(2) EBITDA excludes Star Gas distributions and non-recurring expenses.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 66
<PAGE>
[LOGO OF PETRO APPEARS HERE] COMPARABLE TRANSACTIONS ANALYSIS
1996 - 1997 Petro Acquisitions (Ten Largest)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
1996 - 1997 PETRO ACQUISITIONS (TEN LARGEST)
(Dollar and gallon amounts in thousands, except per gallon and per
customer amounts)
<TABLE>
<CAPTION>
TOTAL TARGET LTM EBITDA TOTAL ACQUISITION TOTAL ACQUISITION
ACQUISITION (PRO FORMA PETRO OWNERSHIP) GALLONS COST CUSTOMERS COST
---------------------------
DATE COMPANY ACQUIRED COSTS EBITDA MULTIPLE ACQUIRED PER GALLON ACQUIRED PER CUSTOMER
- ---------- ----------------------- ----------- ---------- ------------ -------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
02/01/96 Seaman $ 7,134 $1,552 4.6x 7,522 $0.95 7,806 $ 914
01/11/96 Garrison 5,242 1,154 4.5x 5,925 0.88 6,575 797
01/19/96 Cibro 4,368 1,087 4.0x 6,200 0.70 2,426 1,800
10/18/96 Bergen 3,202 718 4.5x 5,501 0.58 1,593 2,010
04/14/97 Mugullian Fuel 2,802 638 4.4x 3,000 0.93 2,570 1,090
04/01/96 McDowell 2,723 669 4.1x 2,675 1.02 2,305 1,182
08/29/97 Oil Burner Utility 2,633 603 4.4x 3,500 0.75 1,590 1,656
09/10/97 Romary 2,252 545 4.1x 2,348 0.96 2,210 1,019
09/29/97 T.W. Perry 1,619 439 3.7x 2,118 0.76 2,461 658
08/26/97 Bellomo 1,489 443 3.4x 1,657 0.90 1,822 817
----------------------------------------------------------------------------------------------------------------------
TOTAL $33,465 $7,848 -- 40,446 -- 31,358 --
MEAN 3,346 785 4.2x 4,045 $0.84 3,136 $1,194
WEIGHTED AVERAGE -- -- 4.3x -- 0.83 -- 1,067
MEDIAN 2,763 654 4.2x 3,260 0.89 2,366 1,055
HIGH 7,134 1,552 4.6x 7,622 1.02 7,806 2,010
LOW 1,489 439 3.4x 1,657 0.68 1,690 658
----------------------------------------------------------------------------------------------------------------------
</TABLE>
_____________
Source: Petroleum Heat and Power Co., Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 67
<PAGE>
[LOGO OF PETRO APPEARS HERE] COMPARABLE TRANSACTIONS ANALYSIS
1996 - 1997 Petro Acquisitions (Excluding Ten
Largest)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
1996 - 1997 PETRO ACQUISITIONS (EXCLUDING TEN LARGEST)
(Dollar and gallon amounts in thousands, except per gallon and per customer
amounts)
<TABLE>
<CAPTION>
TOTAL TARGET LTM EBITDA TOTAL ACQUISITION TOTAL ACQUISITION
ACQUISITION (PRO FORMA PETRO OWNERSHIP) GALLONS COST CUSTOMERS COST
------------------------------
DATE COMPANY ACQUIRED COSTS EBITDA MULTIPLE ACQUIRED PER GALLON ACQUIRED PER CUSTOMER
- ---------- ------------------- ------------- ------------- -------------- ---------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11/24/97 Shreve $1,457 $ 300 4.9X 2,425 $ 0.60 2,782 $ 524
09/11/96 Flynn 1,038 232 4.5X 1,316 0.79 1,070 970
12/18/97 Genovese 1,011 281 3.6X -- -- 1,054 959
10/31/96 Hy-Test 813 177 4.6X 1,468 0.55 1,269 641
01/15/97 Oils Inc. 748 188 4.0X 1,189 0.63 826 905
10/01/97 Miltbrook 527 112 4.7X 908 0.58 900 588
07/10/97 Good 521 117 4.5X 1,200 0.43 1,559 334
12/26/96 Sherman 493 103 4.8X 564 0.67 475 1,037
12/30/96 Grasso 423 116 3.6X 1,118 0.38 1,080 392
05/14/97 Alderfer Heating 401 111 3.6X 787 0.51 740 542
12/27/96 Matco 368 97 3.8X 988 0.37 722 510
12/18/96 Dexter Bros. 332 99 3.4X 786 0.42 700 474
09/24/96 Farren 264 69 3.8X 481 0.55 520 507
10/18/96 Highstown 233 62 3.8x 500 0.47 527 443
------------------------------------------------------------------------------------------------------------------------
TOTAL $8,629 $2,064 -- 13,730 -- 14,224 --
MEAN 616 147 4.1X 1,066 $ 0.55 1,016 $ 630
WEIGHTED AVERAGE -- -- 4.2X -- 0.83 -- 607
MEDIAN 507 114 3.9X 998 0.55 863 633
HIGH 1,457 300 4.9X 2,425 0.87 2,782 1,037
LOW 233 62 3.4X 481 0.37 475 334
------------------------------------------------------------------------------------------------------------------------
</TABLE>
____________
SOURCE: Petroleum Heat and Power Co. Inc.
- --------------------------------------------------------------------------------
Page 68
<PAGE>
[LOGO OF PETRO APPEARS HERE] COMPARABLE TRANSACTIONS ANALYSIS
1994 - 1998 Star Gas Partners Acquisitions
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
1994 - 1998 STAR GAS PARTNERS ACQUISITIONS
(Dollar and gallon amounts in thousands, except per gallon and per customer
amounts)
<TABLE>
<CAPTION>
Total
Acquisition Target LTM EBITDA
----------------------------
Date Company Acquired Costs EBITDA Multiple
- ---------- -------------------------------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
06/15/94 Loveland $ 700 $ 127 5.5x
11/24/94 Baystate 1,450 209 6.9x
09/12/95 Debolt 950 151 6.3x
03/22/96 Bob White L.P. Gas/Mitchell Bottle Gas 1,500 263 5.7x
07/22/96 Fuzzy Moore 850 147 5.8x
10/22/97 Pearl Gas Co. 24,127 3,288 7.3x
02/20/98 Tri-County Gas 550 108 5.1x
05/28/98 Knowles LP Gas 3,000 426 7.0x
05/28/98 Tioga Petroleum 1,200 257 4.7x
07/30/98 Lowe Bros & Dad, Inc. 3,750 602 6.2x
08/11/98 Myers Appliance 1,200 191 6.3x
-----------------------------------------------------------------------------------------
TOTAL $ 39,277 $ 5,769 --
MEAN 3,571 524 6.1x
WEIGHTED AVERAGE -- -- 6.8x
MEDIAN 1,200 209 6.2x
HIGH 24,127 3,288 7.3x
LOW 560 108 4.7x
-----------------------------------------------------------------------------------------
PETROLEUM HEAT AND POWER CO., INC.
-----------------------------------------------------------------------------------------
Normalized 1998E EBITDA $334,058 $44,749 (2) 7.6x
LTM 6/30/98 EBITDA 334,058 30,186 (2) 11.1x
-----------------------------------------------------------------------------------------
</TABLE>
______________
Source: Star Gas Partners, L.P. and Petroleum Heat and Power Co., Inc.
(1) Acquisition cost is based on the Pro Forma Market Value of Capitalization
Analysis (Dain Rauscher Wessels Case), [See Petro Historical and Pro Forma
MVE and MVC Summary on page 25] less Petro's investment in Star. The value
of Petro's investment in Star is the closing market price of a Star Common
Unit one day prior to announcement less a structural subordination discount
of 15% multiplied by Petro's implied Star units.
(2) EBITDA excludes Star Gas distributions and non-recurring expenses.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 69
<PAGE>
[LOGO OF PETRO APPEARS HERE] PROJECT INTENSE HEAT
================================================================================
MERGER PREMIUMS ANALYSIS
- --------------------------------------------------------------------------------
Page 70
<PAGE>
[LOGO OF PETRO APPEARS HERE] Merger Premiums Analysis
Selected Energy Industry Merger & Acquisition
Transactions (1994 - Present, Stock-for-Stock,
$100 - $500 million)
================================================================================
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PROJECT INTENSE HEAT
SELECTED ENERGY INDUSTRY MERGER & ACQUISITION TRANSACTIONS
(1994 - Present, Stock-for-Stock, $100 -$500 million)
Transaction Transaction
Enterprise Equity Premium No.
---------------------------
Date Value ($) Value For 1 Day 1 Week 4 Weeks
Announced Acquiror Name Target Name ($ Mil.) Share Prior Prior Prior
- --------- ------------------------------ ------------------------------ ----------- ---------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
03/24/94 K N Energy, Inc. American Oil and Gas Company $ 410.9 $ 11.05 4.0% 4.0% 5.2%
06/23/94 Drasser Industries, Inc. Wheatley TXT Corp. 173.8 14.70 25.1% 25.1% 32.1%
06/02/94 Ray McDermott S.A. Offshore Pipelines, Inc. 278.6 21.88 14.4% 15.1% 40.0%
06/13/94 Noble Drilling Corporation Chilee Offshore Drilling Company 200.2 5.25 5.0% 2.4% 23.5%
06/20/94 Kelley Oil Corporation Kelley Oil & Gas Partners Ltd. 101.7 5.64 -35.6% -32.7% -16.5%
03/10/94 United Meridian Corporation General Atlantic Resources, Inc. 182.3 16.50 -7.0% -9.6% 11.9%
03/13/94 BJ Services Company Western Company of North America 377.2 20.00 63.3% 73.9% 70.2%
03/20/94 Parker & Parlsey Petroleum Company Tide West Oil Company 141.0 14.24 -0.1% 21.2% 16.2%
11/30/94 National Energy Group, Inc. Alexander Energy Corporation 103.6 4.46 -28.6% -27.1% -23.2%
03/08/95 Moorco International Daniel Industries, Inc. 187.8 16.29 29.0% 22.9% 19.6%
05/03/95 Barnett Resources Corporation Plains Petroleum Company 299.6 30.23 34.3% 38.2% 39.0%
11/20/95 Tidewater, Inc. Homeback Offshore Services, Inc. 310.8 21.67 40.9% 40.9% 46.9%
01/25/95 ENSCO International, Inc. Dual Drilling (Mosvold Shipping) 224.7 14.22 8.9% 13.2% 23.7%
02/26/95 HS Resources, Inc. Tide West Oil Company 201.3 15.91 44.6% 44.6% 51.5%
06/17/97 Baker Hughes Incorporated Drilex International, Inc. 120.1 17.58 31.4% 37.9% 59.8%
08/10/97 Holburton Company Numar Corporation 341.6 39.62 90.9% 99.3% 95.7%
06/20/97 Forcenergy Inc. Convest Energy Corporation 102.0 9.44 11.1% 11.1% 18.9%
06/20/97 Forcenergy Inc. Edisio Resources Corporation 147.7 10.27 -6.6% -6.6% -0.4%
06/24/97 Louis Drayfus Natural Gas Company American Exploration Company 275.5 15.96 13.0% 15.0% 21.6%
06/30/97 Balco Oil & Gas Corporation Hugoton Energy Corporation 263.1 15.00 15.4% 20.0% 36.4%
07/07/97 Meridan Resource Corporation Caim Energy USA, Inc. 233.6 13.30 22.3% 29.0% 26.7%
11/13/97 Chesapeske Energy Corporation Hugoton Energy Corporation 377.0 13.33 7.7% 11.0% 26.9%
12/15/97 EVI, Inc. Christiana Companies, Inc. 214.7 34.74 -14.7% -16.5% -15.0%
03/12/98 El Paso Natural Gas Company Deep Tech International 375.4 14.00 8.7% 9.8% 15.5%
05/12/98 Lomak Petroleum, Inc. Domain Energy Corporation 151.9 9.36 -25.1% -30.0% -28.7%
06/13/98 MoMoRan Oil & Gas Company Freeport-MoMo Ran Sulphur, Inc. 124.2 12.50 14.9% 6.4% 4.2%
06/03/98 CFAS Energy Corporation Continental Natural Gas, Inc. 151.2 9.31 1.4% 26.3% 33.0%
08/10/98 R&B Falcon Corporation Cliffs Drilling Company 452.1 28.16 39.0% 41.2% 17.0%
09/14/98 TransMontalons Inc. Louis Dreyfus Energy Corp. 161.0 11.63 8.1% 7.5% -15.5%
-------------------------------------------------------------------------------------
Mean $ 230.5 14.3% 17.0% 21.9%
Median 201.3 11.1% 15.0% 21.6%
High 452.1 90.9% 99.3% 95.7%
Low 101.7 -35.6% -32.7% -28.7%
-------------------------------------------------------------------------------------
Petroluem Heat and Power Co., Inc. (Senior Subordinated Unit/Implied Reference Value
08/14/98 Parker & Parsley Premium Company per Petro Share) (2)
-------------------------------------------------------------------------------------
Implied Reference Value (including DPUs and GP
Incentives) $ 2.54 35.6% 62.7% 40.3%
DPUs and GP Incentive Value 0.43
--------
Total Implies Reference Value $ 2.97 58.6% 90.3% 64.1%
-------------------------------------------------------------------------------------
_______________
Source: Securities Data Company, publicly available information and Petroleum Heat and Power Co., Inc.
(1) Transaction Enterprise Value is defined as common equity purchase price plus total debt and preferred stock, less cash and
equivalents, excluding fees and expenses.
The stock is valued using the closing price on the last full trading day prior to announcement.
(2) The Senior Subordinated Unit Implied Reference Value per Petro share is based on the Unit Reference Value Analysis (Dain
Rauscher Wessels Case), (See Unit Reference Value Analysis Summary on page 9)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Page 71
<PAGE>
[LOGO OF PETRO APPEARS HERE] MERGER PREMIUMS ANALYSIS
Selected Recent All Industries Merger &
Acquisitions Transactions
(1998 - Present, Stock-for-Stock, $100 - $500
million)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Selected Recent All Industries Merger & Acquisition Transactions
(1998 - Present, Stock-for-Stock, $100 - $500 million)
<TABLE>
<CAPTION>
Transaction Transaction Premium to:
Enterprise Equity -------------------------
Date Value Value Per 1 Day 1 Week 4 Weeks
Announced Acquired Name Target Name ($ mill.) Share Prior Prior Prior
- ----------- -------------------------------- ---------------------------- -------------- ------------ -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
01/01/98 ConAgra Inc GoodMark Foods Inc $217.8 $28.58 54.5% 75.9% 69.4%
01/12/98 Mercantile Bancorp, St Louis, MO CBT Corp, Paducah Kentucky 275.8 34.36 3.3% 1.8% 19.5%
01/14/98 Suiza Foods Corp Continental Con Co Inc 330.5 40.65 45.8% 74.4% 71.2%
01/15/98 First Midwest Bancorp, IL Heritage Financial Services 405.8 32.61 7.8% 10.5% 31.1%
01/15/98 International Technology Corp OHM Corp 326.8 11.33 24.2% 45.1% 51.4%
01/26/98 USA Waste Services Inc TransAmerican Waste Industries 142.3 2.18 51.4% 36.6% 78.6%
02/02/98 BMC Software Inc BOS Systems Inc 306.9 45.00 23.3% 32.4% 42.9%
02/02/98 CompassBank, New Bedford, MA Sandwich Bancorp, Sandwich,MA 129.6 64.00 47.1% 48.8% 48.8%
02/02/98 Romac International Inc Source Services Corp 454.4 31.93 51.1% 56.7% 50.2%
02/02/98 Primus Telecomunicstions TresCom International Inc 134.7 10.30 25.2% 30.9% 51.5%
02/09/98 Kinross Gold Corp Amax Gold (Cyprus Amax Mineral) 365.5 2.90 -9.0% -1.3% 36.5%
02/17/98 Applied Graphics Technologies Devon Group Inc 474.4 60.08 29.2% 32.0% 37.9%
02/17/98 Bayou Steel Corp Northwestern Steel & Wire Co 239.7 4.00 10.3% -4.5% 20.6%
02/17/98 Cape Cod Bank & Trust, Hyannis Sandwich Bancorp, Sandwich, MA 121.4 60.00 20.2% 20.3% 37.9%
02/19/98 First Security Corp, Utah California State Bank 276.9 48.72 11.4% 14.0% 18.6%
02/19/98 PLATINUM Technology Inc Mastering Inc 198.7 12.50 31.6% 25.0% 33.3%
02/23/98 Network Associates Inc Trusted Information Systems 322.1 20.19 59.9% 84.6% 92.3%
02/24/98 Baxter International Inc Somatogen Inc 232.9 9.00 35.8% 39.8% 92.0%
02/25/98 BB&T Corp, Winston-Salem, NC Maryland Federal Bancorp Inc 243.6 37.05 16.7% 19.0% 22.5%
03/02/98 Unitrode Corp Benchmarq Microelectronics Inc 150.6 18.81 15.6% 14.0% 67.2%
03/02/98 Sunbean Corp Coleman Co Inc 333.0 30.14 44.4% 58.6% 121.2%
03/02/98 El Paso Natural Gas Co DeepTech International 375.4 14.00 8.7% 9.8% 15.5%
03/02/98 Slebell Systems Inc Scopus Technology Inc 490.7 22.39 58.5% 93.6% 100.1%
03/08/98 Protective Life Corp United Dental Care Inc 180.4 19.58 20.5% 49.2% 57.4%
03/09/98 Commercial Federal, Omaha, NE First Colorado Bancorp Inc, CO 449.5 25.54 -9.6% 0.2% 0.2%
03/13/98 St. Paul Bancorp Chicago, IL Beverly Bancorp, Tinley Park, IL 161.8 28.10 16.5% 17.4% 19.6%
03/16/98 PLATINUM Technology Inc Logic Works Inc 212.9 15.32 13.0% 36.2% 57.1%
03/24/98 Cognizant Corp Pharmaceutical Marketing Services 188.7 14.65 13.8% 22.1% 45.6%
03/24/98 Cognizant Corp Walsh International Inc 176.8 15.91 8.8% 36.8% 53.3%
03/25/98 Fidelity National Financial Matrix Capital Corp 193.1 27.95 45.2% 64.4% 74.7%
03/26/98 Aviation Sales Whitehall Corp 139.9 22.57 2.6% -2.9% 9.1%
03/27/98 ISP Holdings Inc Intl Speciality Products 324.5 18.25 4.3% 1.7% 14.5%
03/31/98 Union Planters Corp, Memphis, TN Ambanc Corp, Vincennes Indiana 210.8 30.10 3.8% 22.9% 20.4%
03/31/98 Hubco Inc, Mahwah, New Jersey Dime Financial Corp 214.0 38.25 6.3% 25.4% 22.9%
03/31/98 Hubco Inc, Mahwah, New Jersey IBS Financial Corp 242.4 20.73 3.6% 2.4% 16.0%
03/31/98 Omnicare Inc IBAH Inc 154.3 5.75 12.2% 61.4% 58.6%
04/06/98 FirstMerit Corp Security First Corporation 251.2 29.28 30.8% 30.8% 34.6%
04/06/98 Applied Power Inc Zero Corp 431.6 33.63 16.5% 18.0% 33.2%
04/09/98 Complete Business Solutions Claremont Technology Group Inc 282.5 27.00 21.3% 77.0% 118.2%
04/15/98 Giant Industries Inc Holly Corp 251.4 27.43 3.0% 2.5% -1.2%
04/16/98 Phoenix Technologies Ltd Award Software International 129.5 16.08 12.8% 21.3% 53.1%
04/17/98 Sterling Commerce Inc XcelleNet Inc 214.3 22.02 6.1% 12.5% 7.7%
04/27/98 Bright Horizons Holdings Inc Corporate Family Solutions Inc 127.0 23.69 -21.4% -22.3% -7.5%
05/12/98 Lomak Petroleum Inc Domain Energy Corporation 151.9 9.36 -25.1% -30.0% -28.7%
05/19/98 First Charter Corp, NC HFNC Financial Corp 240.2 13.97 -12.4% -12.7% -13.4%
05/19/98 Quantum Corp ATL Products Inc (???) 304.0 29.00 8.4% 19.0% 45.0%
05/28/98 Republic Security Financial First Palm Beach Bancorp Inc 295.0 55.05 50.8% 46.8% 45.1%
05/29/98 Pogo Producing Co Arch Petroleum Inc 114.0 2.47 0.1% 5.5% -3.5%
</TABLE>
- --------------------------------------------------------------------------------
________________________________________________________________________________
72
<PAGE>
[LOGO OF PETRO APPEARS HERE] Merger Premiums Analysis
Selected Recent All Industries Merger &
Acquisition Transactions (1998 - Present,
Stock-For-Stock, $100-$500 million)
================================================================================
PROJECT INTENSE HEAT
Selected Recent All Industries Merger & Acquisition Transactions
(1998-Present, Stock-for-Stock, $100-$500 million)
<TABLE>
<CAPTION>
Transaction Transaction Preminum to:
Enterprise Equity ------------------------------
Date Value (1) Value For 1 day 1 week 4 weeks
Announced Acquiror Name Target Name ($ mill.) Shares prior prior prior
- ---------- ------------------- ----------------------- ----------- ---------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
06/02/98 State Financial Services Corp Home Bancorp of Elgin. Elgin, IL $134.0 $19.05 11.3% 11.3% 8.9%
06/04/98 PMC Commercial Trust Supertel Hospitality Inc 131.9 12.15 -6.5% 5.6% -4.7%
06/04/98 World Access Inc Telco Systems Inc 194.5 17.00 77.8% 65.9% 63.9%
06/12/98 Davel Communications Group Inc PhoneTel Technologies Inc 227.7 3.08 64.3% 69.9% 208.0%
06/18/98 Summit Bancorp, Princeton, NJ HSS Bancorp, Norwalk, CT 151.3 58.83 28.2% 36.8% 31.5%
06/22/98 Leaming Co Inc Broderbund Software Inc 424.3 20.00 21.2% 16.4% 19.0%
06/24/98 Mylan Laboratories Inc Penederm Inc 193.1 21.89 39.0% 39.5% 88.3%
06/29/98 Philadelphia Suburban Corp Consumers Water Co 465.6 30.46 25.6% 33.1% 42.5%
07/01/98 Metzler Group Inc Lecg Inc 294.4 21.98 46.5% 49.0% 41.8%
07/06/98 Davel Communications Group Inc Peoples Telephone Co Inc 114.5 5.86 87.5% 80.3% 118.0%
07/09/98 Zebra Technologies Corp Eltron International Inc 287.7 36.00 25.8% 34.6% 57.4%
07/16/98 First Commonwealth Financial Southwest National Corp, PA 269.8 88.63 61.1% 80.9% 77.3%
07/20/98 Richmond County Financial Corp Bayonne Bancshares New Jersey 177.7 19.03 11.1% 16.7% 18.9%
07/20/98 Santa Barbara Bancorp, CA Pacific Capital Bancorp, CA 291.4 62.40 27.4% 41.8% 45.1%
07/20/98 Peoples Heritage Fini Group, ME SIS Bancorp Inc, Springfield, MA 427.6 57.23 27.2% 34.7% 44.0%
07/23/98 HBO & Co IMNET Systems Inc 287.7 27.62 69.9% 74.0% 77.4%
07/23/98 Digital Microwave Corp Inova Corp 115.7 6.83 16.2% 36.5% 30.0%
07/31/98 Banknorth Group Inc Evergreen Bancorp Inc 313.1 34.43 24.1% 28.4% 19.7%
08/03/98 CMS Energy Corporation Continental Natural Gas, Inc. 151.2 9.31 1.4% 26.3% 33.0%
08/03/98 McMoRan Oil & Gas Co Freeport, McMoRan Sulphur Inc 124.2 12.50 14.9% 6.4% 4.2%
08/04/98 Public Storage Inc Storage Trust Realty 366.2 25.00 11.1% 8.1% 1.0%
08/07/98 City Holding Co, Charleston, WV Horizon Bancorp, Beckley WV 413.4 45.00 6.2% 8.4% 15.0%
08/10/98 R&B Falcon Corp Cliffs Drilling Co 452.? 28.16 39.0% 41.2% 17.0%
08/10/98 BB&T Corp, Winston-Salem, NC Scott & Stringfollow Financial 126.4 34.44 19.8% 28.7% 35.0%
08/24/98 Liberty Media (Tele-Commun) Tele-Commun Inti (Tele-Commun) 379.1 20.77 -1.1% -4.5% -9.9%
09/02/98 Sanmina Corp Altron Inc 195.3 12.39 16.6% 6.5% 7.7%
09/02/98 USWeb Corp CKS Group Inc 342.9 21.66 53.3% 30.3% 23.7%
09/02/98 Rent-Way Inc Home Choice Holdings Inc 231.4 13.60 7.2% 4.1% 7.7%
09/08/98 Sovereign Bancorp. PA Peoples Bancorp Inc, New Jersey 381.4 10.50 26.3% 44.8% 21.7%
09/09/98 First Consulting Group Inc Integrated Systems Consulting 110.4 13.67 33.7% 30.2% 12.7%
09/14/98 TransMontaigne Inc. Louis Dreyfus Energy Corp 161.0 11.63 8.1% 7.5% -15.5%
09/14/98 Qwest Commun Int Inc. Icon CMT Corp 190.6 12.00 65.5% 60.0% -4.0%
-----------------------------------------------------------------------------------------
Mean $253.8 23.2% 29.6% 38.5%
Medium 236.3 16.2% 28.6% 33.3%
High 490.7 87.5% 93.6% 208.0%
Low 110.4 -25.?% 30.0% -28.7%
-----------------------------------------------------------------------------------------
?? Star Gas Partners, LP. Petroleum Heat and Power Co, Inc. (Senior Subordinated Unit/Implied Reference Value per
Petro Shares)(92)
-----------------------------------------------------------------------------------------
Implied Reference Value (excluding DPUs and GP
Incentives) $2.54 35.6% 62.7% 40.3%
DPUs and GP Incentives Value 0.43
------
Total Implied Reference Value $2.97 58.6% 90.3% 64.1%
-----------------------------------------------------------------------------------------
__________________
Source: Securities Data Company, pubilcy available information and Petroleum heat and Power Co., Inc.
(1) Transaction Enterprise Value is defined as common equity purchase price plus total debt and preferred stock, less cash and
equivalent, excluding fees and expenses.
The stock is valued using the closing price on the last full trading day prior to announcement.
(2) The Senior Subordinated Unit Implied Reference Value per Petro share is based on the Unit Reference Value Analysis
(Dain Rauscher Wessel's Case), (See Unit Reference Value Analysis Summary on page 9)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Page 73
<PAGE>
[LOGO OF PETRO APPEARS HERE] PROJECT INTENSE HEAT
================================================================================
PRICE AND VOLUME DATA
- --------------------------------------------------------------------------------
Page 74
<PAGE>
[LOGO OF PETRO APPEARS HERE] PRICE AND VOLUME DATA
First Trading Day of Class A Common Shares (July
29, 1992) - Present Petro Weekly Stock Price/Volume
================================================================================
[GRAPH APPEARS HERE]
__________________
Source: Factset Data Systems and publicly available information.
- --------------------------------------------------------------------------------
Page 75
<PAGE>
[LOGO OF PETRO APPEARS HERE] PRICE AND VOLUME DATA
IPO (December 14, 1995) - Present Star Gas Daily
Unit Price/Volume
================================================================================
[GRAPH APPEARS HERE]
___________
Source: Factset Data Systems and Publicly available information.
- --------------------------------------------------------------------------------
Page 76
<PAGE>
[LOGO OF PETRO APPEARS HERE] PRICE AND VOLUME DATA
1997 - Present Relative Price Performance
================================================================================
[GRAPH APPEARS HERE]
___________
Source: Factset Data Systems.
(1) Peer group includes Amerigas Partners, Cornerstone Propane Partners,
Ferrellgas Partners, Heritage Propane Partners and Suburban Propane Partners
and excludes National Propane Partners.
- --------------------------------------------------------------------------------
Page 77
<PAGE>
[LOGO OF PETRO APPEARS HERE] PRICE AND VOLUME DATA
Relative Price Performance Since Annoncement of
Merger (August 14, 1998)
================================================================================
[GRAPH APPEARS HERE]
___________
Source: Factset Data Systems.
(1) Peer group includes Amerigas Partners, Cornerstone Propane Partners,
Ferrellgas Partners, Heritage Propane Partners and Suburban Propane Partners
and excludes National Propane Partners.
- --------------------------------------------------------------------------------
Page 78
<PAGE>
[LOGO OF PETRO APPEARS HERE] PRICE AND VOLUME DATA
Present Total Return/(1)/
================================================================================
[GRAPH APPEARS HERE]
___________
Source: Factset Data Systems.
(1) Total return is defined as compound return, with distributions reinvested on
ex-dates.
- --------------------------------------------------------------------------------
Page 79
<PAGE>
[LOGO OF PETRO APPEARS HERE] PRICE AND VOLUME DATA
1997 - Present Total Return/(1)/
================================================================================
[GRAPH APPEARS HERE]
___________
Source: Factset Data Systems.
(1) Total return is defined as compound return, with distributions reinvested on
ex-dates.
(2) Peer group includes Amerigas Partners, Cornerstone Propane Partners,
Ferrellgas Partners, Heritage Propane Partners and Suburban Propane Partners
and excludes National Propane Partners.
- --------------------------------------------------------------------------------
Page 80
<PAGE>
EXHIBIT 99(b)(3)
- --------------------------------------------------------------------------------
Confidential
- --------------------------------------------------------------------------------
PETROLEUM HEAT & POWER CO., INC.
BOARD OF DIRECTORS PRESENTATION
July 24, 1997
Paine Webber Incorporated
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
---------------------------------------------------------------------------
I SITUATION ANALYSIS
II THE TRANSACTION
III BENEFITS OF THE TRANSACTION
IV ECONOMICS OF THE TRANSACTION
V COMPARABLE MLP ANALYSIS
---------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
PART I
SITUATION ANALYSIS
- --------------------------------------------------------------------------------
1
<PAGE>
- -------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- -------------------------------------------------------------------------------
SITUATION ANALYSIS
---------------------------------------------------------------------------
HEATING OIL BUSINESS
. Petro remains the dominant force in the heating oil business, selling at
least 3 times as much as its nearest competitor.
. Petro also dominates the acquisition market, acquiring a substantial
share of all heating oil businesses sold.
. While the company has constantly made acquisitions over the last 5
years, higher than expected attrition rates have resulted in little
EBITDA growth.
. Operational changes which were instituted on a small scale in 1996-1997
are expected to reduce the attrition rates over the next several years.
. It is anticipated that the acquisition market will continue to be strong
as more owners approach retirement age and capital gain tax relief
appears in sight.
---------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
SITUATION ANALYSIS
___________________________________________________________________________
PETRO'S STOCK PERFORMANCE
. Petro's stock has been in a steady decline since 1992.
. Petro's stock was particularly hard hit as a result of the warm winter
of 1996-1997.
. It is difficult to determine what portion of the stock's performance was
related to Petro's financial performance and what portion is
attributable to a lack of research and institutional following and a
lack of comps.
. More importantly, one must question whether or not the operational
improvement which is expected over the next two years will be reflected
in a higher stock price.
. Furthermore, Petro's ability to pursue accretive acquisitions will
continue to be limited by capital constraints.
___________________________________________________________________________
3
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
SITUATION ANALYSIS
---------------------------------------------------------------------------
PROPANE BUSINESS
. Large acquisitions have been scarce. Steady stream of mega-acquisitions
(1994-96) as over $1.5 billion of equity capital has been raised from
1992-1996.
. Pricing on all acquisitions has become extremely competitive.
. Multiples for even small deals have expanded.
. Wholesale price spike during the 1996-1997 season revealed another level
of uncertainty, even for those companies (like Star) which profited from
the spike.
. Warm winter in the Northeast compounded the problem for many players.
. The market is starting to question whether propane MLPs are really growth
vehicles.
. The market is also starting to question if the weather is ever normal (it
always seems to be abnormally warm in some section, which more than
offsets good results elsewhere).
---------------------------------------------------------------------------
4
<PAGE>
- -------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
SITUATION ANALYSIS
---------------------------------------------------------------------------
STAR'S STOCK PERFORMANCE
. While Star has performed relatively well, it is difficult for the market
to assess how much of the performance was related to inventory gains.
. Star continues to lag behind other MLPs in terms of acquisitions, where
Star's ability to compete is limited.
- Management's limited propane experience limits deal flow
- Geographic concentration limits "blend-in" opportunities
- Larger and better capitalized players competing for the same assets
---------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
PART II
THE TRANSACTION
---------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
THE TRANSACTION
---------------------------------------------------------------------------
OVERVIEW
. We believe that a public stock corporation is not the optimal format for
Petro.
- No direct comparables
- Rapid amortization of customer lists results in no earnings
- Perceived limited growth in heating oil industry
- Small capitalization results in limited research coverage
. Furthermore, the leveraged capital structure limits financial flexibility
and growth opportunities.
* AS A RESULT, PETRO'S STOCK HAS NOT PERFORMED WELL AND IS NOT LIKELY TO
ACHIEVE FULL VALUATION EVEN IF OPERATIONS IMPROVE.
---------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
THE TRANSACTION
---------------------------------------------------------------------------
IN ORDER TO ADDRESS THESE VALUATION ISSUES, PETRO SHOULD CONSIDER THE
BENEFITS OF AN MLP STRUCTURE WHICH CAN BE ACHIEVED THROUGH A MERGER WITH
STAR GAS
. MLPs typically trade on a yield basis, which currently translates into a
9-10x EBITDA multiple vs a 7-8x multiple historically at Petro.
. The combination of the two companies would result in a sizable MLP
(approximately $300 million implied equity value) which translates into
better valuation and greater liquidity.
. Concurrent with the merger, the issuance of new equity would restructure
and delever the balance sheet.
. The new entity would have substantially better access to capital to fund
future growth.
* THE COMBINED ENTITY WOULD HAVE THE INVESTMENT STORY TO ATTRACT
RESEARCH COVERAGE AND WOULD BENEFIT BOTH PETRO AND STAR GAS SHARE/UNIT
HOLDERS.
---------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
THE TRANSACTION
--------------------------------------------------------------------------
THE TRANSACTION INVOLVES TWO SEPARATE STAGES:
--------------------------------------------------------------------------
STAGE 1 -- THE EXCHANGE
--------------------------------------------------------------------------
PETRO SHAREHOLDERS EXCHANGE THEIR COMMON STOCK FOR STAR GAS MASTER LIMIT
PARTNERSHIP UNITS AT $4.50/SHARE
. Shareholders who hold only Class A shares exchange into Senior
Subordinated MLP units
. Senior Subordinated MLP Units valued at +/- 10% discount to Common
Units
. "Inside" shareholders /(1) /exchange either into Senior Subordinated
MLP Units or Subordinated Units plus the General Partnership Interest
. Senior Subordinated Units offered to "Insiders" will be capped at 3.5
million Petro shares in order to provide adequate coverage to Star
Common Units
. Subordinated Units valued at +/- 20% discount to Common Units
. All Senior Subordinated and Subordinated Units convert to Common Units
after 3 years of "Earn & Pay" of $2.30 (i.e. increase the MQD on the
Common Units)
--------------------------------------------------------------------------
_____________________
(1) Insiders for the purposes of this discussion are those individuals
who own Class C and Class A common shares.
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
THE TRANSACTION
---------------------------------------------------------------------------
THE TRANSACTION INVOLVES TWO SEPARATE STAGES:
---------------------------------------------------------------------------
STAGE 2 -- THE RECAPITALIZATION
---------------------------------------------------------------------------
APPROXIMATELY $330 MILLION OF PETRO DEBT AND PREFERRED STOCK ARE REFINANCED
. Existing issues will be either redeemed, exchanged, defeased or tendered
for, depending on issue
. Approximately $140 million of new Star equity will be raised through the
sale of Common Units
. Approximately $125 million of new, investment grade debt will be issued
---------------------------------------------------------------------------
___________________________________________________________________________
10
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
THE TRANSACTION
----------------------------------------------------------------------------
[GRAPH APPEARS HERE]
* PETRO PUBLIC SHAREHOLDERS EXCHANGE FOR SENIOR SUBORDINATED; INSIDERS
EXCHANGE FOR A COMBINATION OF SENIOR SUBORDINATED AND/OR SUBORDINATED +
G.P. UNITS. THE MLP SELLS COMMON UNITS AND USES THE PROCEEDS TO
RECAPITALIZE AND REFINANCE.
----------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
THE TRANSACTION
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
STAGE 1 -- THE EXCHANGE
-------------------------------------------------------- ----------------------------------------------------------
CURRENT CONSIDERATION RECEIVED
-------------------------------------------------------- ----------------------------------------------------------
SHARES UNITS
PETRO SHAREHOLDER TYPE (000'S) TYPE OF MLP INTEREST (000'S)
-------------------------------------------------------- ----------------------------------------------------------
<S> <C> <C> <C>
Holders of Class A Only 16,355 Senior Subordinated Units 3,520
Holders of Class A and C Shares
Shares Permitted To Be Exchanged
Into Senior Subordinated Units 3,500 Senior Subordinated Units 753
Shares To Be Exchanged Into
Subordinated Units and GP Interest 5,904 Subordinated and General Partner Interest 1,186
------ -----
Sub Total 9,404
------
TOTAL 25,759 TOTAL 5,459
-------------------------------------------------------- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STAGE 2 -- THE RECAPITALIZATION
---------------------------------------------------------------------------------
UNITS OUTSTANDING AT MLP AFTER RECAPITALIZATION (000'S)
---------------------------------------------------------------------------------
<S> <C>
Common Units
Currently Outstanding 2,875
Newly Issued ($139.0 million) 6,046
------
Total 8,921
Senior Subordinated Units 4,273
Subordinated Units and GP Interest 1,186
------
TOTAL 14,380
---------------------------------------------------------------------------------
</TABLE>
---------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
PART III
BENEFITS OF THE TRANSACTION
---------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
BENEFITS TO PETRO SHAREHOLDERS
- --------------------------------------------------------------------------------
. Premium to market.
-- At $4.50 per share, the exchange represents approximately a 50%
premium to market
. Higher valuation multiples.
-- MLPS typically trade at 9-10x EBITDA
. Enhanced growth potential due to greater access to capital.
-- Branding and internal marketing
-- Improved productivity through capital investment
-- Acquisitions
. Lower overall cost of capital.
-- New debt at +/- 8% vs. 12% existing debt
-- Equity capital with limited upside
. Greater size and liquidity.
-- Implied equity market value quadruples to over $300 million
. Greater financial flexibility.
-- Extend maturities through refinancing
-- Improved covenants due to investment grade rating
---------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
BENEFITS TO STAR UNITHOLDERS
---------------------------------------------------------------------------
DESPITE ATTRACTIVE FINANCIAL PERFORMANCE, STAR TRADES AT A HIGHER YIELD
THAN ITS PEER GROUP. THIS IS DUE TO LACK OF SIZE, GROWTH POTENTIAL, AND
GEOGRAPHIC DIVERSITY. AS A RESULT OF THE TRANSACTIONS, STAR HOLDERS WILL
BENEFIT FROM THE FOLLOWING:
. Increased earnings and distributions.
<TABLE>
<CAPTION>
------------------------------------------------------------------------
FROM TO /(1)/
------------------------------------------------------------------------
<S> <C> <C>
Distributable Cash per unit $2.28 $2.84
Distributions per unit $2.20 $2.30
------------------------------------------------------------------------
</TABLE>
. Increase MQD to $2.30 per unit.
. Higher total distribution coverage.
<TABLE>
<CAPTION>
------------------------------------------------------------------------
FROM TO /(1)/
------------------------------------------------------------------------
<S> <C> <C>
Coverage on Common Units 1.9x 2.0x
Coverage on Total Units 1.0x 1.2x
------------------------------------------------------------------------
</TABLE>
. Larger size equity market capitalization.
. Provides vehicle for growth in otherwise stagnant market.
. New identity following aborted sale.
____________
(1) Based on weather normalized 1997 results as provided by the Company.
---------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
BENEFITS OF THE TRANSACTION
---------------------------------------------------------------------------
DISTRIBUTION INCREASE OF SELECTED MLPS SINCE IPO (CURRENT IMPLIED YIELD)/(1)/
[GRAPHS APPEARS HERE]
* INVESTORS HAVE REWARDED INCREASED CASH FLOW WITH ATTRACTIVE VALUATIONS.
__________________
(1) As of 7/22/07.
---------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
BENEFITS OF THE TRANSACTION
---------------------------------------------------------------------------
IMPLIED MARKET VALUE OF EQUITY OF SELECTED PROPANE MLPS (CURRENT IMPLIED
YIELD)/(1)/
[GRAPH APPEARS HERE]
* THE LARGER PROPANE MLPS HAVE GREATER MARKET LIQUIDITY AND INVESTOR
AWARENESS AND ARE SUBSEQUENTLY OFTEN REWARDED WITH LOWER YIELDS.
_______________________________
(1) As of 7/22/97. Implied Market Value of Equity includes all Common,
Subordinated and GP interests.
---------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
BENEFITS OF THE TRANSACTIONS
---------------------------------------------------------------------------
PUBLIC UNIT DISTRIBUTION COVERAGE OF SELECTED PROPANE MLPS (CURRENT IMPLIED
YIELD)/(1)/
[GRAPH APPEARS HERE]
* PROPANE MLPS WITH HIGHER DISTRIBUTION COVERAGE PROVIDE INVESTORS WITH
ADDITIONAL SECURITY, RESULTING IN IMPROVED MARKET VALUATIONS.
__________________________
(1) As of 7/22/97.
---------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Co., Inc.
- --------------------------------------------------------------------------------
PART IV
ECONOMICS OF THE TRANSACTION
---------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Co., Inc.
- --------------------------------------------------------------------------------
TRANSACTION ASSUMPTIONS
---------------------------------------------------------------------------
PETROLEUM HEAT & POWER
<TABLE>
<CAPTION>
BASE CARE OPTIMISTIC CARE PESSIMISTIC CARE
------------------------------- ------------------------------ -----------------------------
$3.5 Million Maint. CapEx $3.5 Million Maint. CapEx $3.5 Million Maint. CapEx
15-Year Weather 30-Year Weather 15-Year Weather
60% productivity improvement 60% productivity improvement 60% productivity improvement
------------------------------- ------------------------------ -----------------------------
ATTRITION ACQUISITIONS/(1)/ ATTRITION ACQUISITIONS/(1)/ ATTRITION ACQUISITIONS/(1)/
<S> <C> <C> <C> <C> <C> <C>
1998 5.0% $15.0 MILLION 4.0% $25.0 MILLION 5.0% $15.0 MILLION
1999 3.5 15.0% 3.0 25.0 4.0 7.5
2000 3.5 22.5 2.0 25.0 4.0 --
2001 1.6 22.5 1.0 25.0 4.0 --
</TABLE>
STAR GAS PARTNERS
---------------------------------------------------------------------------
ALL CASES
---------------------------------------------------------------------------
$2.75 Million in Acquisitions Per Year at 6.5X EBITDA
2% Internal Growth
2.0 Million International Growth CapEx per Year
3.0 Million in Maintenance Growth CapEx per Year
---------------------------------------------------------------------------
Scenario 1 Scenario 2
---------------------------------------------------------------------------
30 Year Weather 15 Year Weather
---------------------------------------------------------------------------
____________________
(1) Petro pro forma for the transaction assumes $25.0 million in
acquisitions per year.
---------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
Petroelum Heat & Power Co.,
- --------------------------------------------------------------------------------
ECONOMICS OF THE TRANSACTION
---------------------------------------------------------------------------
IMPACT OF TRANSACTION ON CASH DISTRIBUTION AND VALUE TO PETRO SHAREHOLDERS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
BASE CASE OPTIMISTIC CASE PESSIMISTIC CASE
CURRENT/(1)/ PRO FORMA CURRENT/(1)/ PRO FORMA CURRENT/(1)/ PRO FORMA
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997 $0.30 $ 0.49 $ 0.30 $ 0.63 $0.30 $0.49
1998 - 0.51 - 0.68 - 0.49
1999 - 0.54 - 0.82 - 0.49
2000 - 0.57 - 0.93 - 0.49
2001 - 0.78 - 0.98 - 0.49
Terminal Share Value $7.53 $ 9.45 $11.86 $12.25 $2.60 $5.44
Basis for Terminal Value 8.0x EBITDA 8.25% Yield 8.0x EBITDA 8.0% Yield 7.0x EBITDA 9.0% Yield
Total Future Value $7.92 $12.70 $12.25 $16.78 $2.99 $8.23
---------------------------------------------------------------------------------------------------------------------
</TABLE>
_________________________
(1) Assumes dividends are cut in order to conserve cash and fund
acquisitions.
- -------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
ECONOMICS OF THE TRANSACTION
- --------------------------------------------------------------------------------
EFFECT OF TRANSACTION ON STAR UNITHOLDER DISTRIBUTIONS AND UNIT VALUE -- BASE
CASE
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
CURRENT DISTRIBUTABLE CASH
------------------------------------------------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earned $ 1.95 $ 2.28 $ 2.09 $ 2.19 $ 2.30 $ 2.42
Paid 2.20 2.20 2.20 2.20 2.30 2.40
Yield 10.0% 10.0% 10.0% 9.5% 9.0% 9.0%
Unit Value $22.00 $22.00 $22.00 $23.16 $25.56 $26.67
--------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
PRO FORMA DISTRIBUTABLE CASH
------------------------------------------------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earned $ 2.17 $ 2.84 $ 2.64 $ 2.92 $ 3.12 $ 3.24
Paid 2.30 2.30 2.40 2.50 2.60 2.70
Yield 10.0% 10.0% 10.0% 9.0% 8.0% 7.5%
Unit Value $22.00 $23.00 $24.00 $26.32 $32.50 $36.00
--------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
22
<PAGE>
- -------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- -------------------------------------------------------------------------------
ECONOMICS OF THE TRANSACTION
--------------------------------------------------------------------------
EFFECT OF TRANSACTION ON STAR UNITHOLDER DISTRIBUTIONS AND UNIT VALUE --
BASE CASE
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
CURRENT DISTRIBUTABLE CASH
-----------------------------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earned $ 1.95 $ 2.28 $ 2.38 $ 2.50 $ 2.63 $ 2.77
Paid 2.20 2.20 2.38 2.49 2.60 2.72
Yield 10.0% 10.0% 10.0% 9.5% 9.0% 8.5%
Unit Value $22.00 $22.00 $23.80 $26.21 $28.89 $32.00
------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
PRO FORMA DISTRIBUTABLE CASH
-----------------------------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earned $ 2.17 $ 2.84 $ 2.98 $ 3.36 $ 3.63 $ 3.77
Paid 2.30 2.30 2.85 3.04 3.18 3.25
Yield 10.0% 10.0% 10.0% 9.0% 8.0% 8.0%
Unit Value $23.00 $23.00 $28.50 $33.78 $39.75 $40.63
------------------------------------------------------------------------------------------------
</TABLE>
---------------------------------------------------------------------------
23
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
ECONOMICS OF THE TRANSACTION
---------------------------------------------------------------------------
EFFECT OF TRANSACTION ON STAR UNITHOLDER DISTRIBUTIONS AND UNIT VALUE --
PESSIMISTIC CASE
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
CURRENT DISTRIBUTABLE CASH
-----------------------------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earned $ 1.95 $ 2.28 $ 2.09 $ 2.19 $ 2.30 $ 2.42
Paid 2.20 2.20 2.20 2.20 2.20 2.20
Yield 10.0% 10.0% 10.0% 9.5% 9.0% 9.0%
Unit Value $ 22.00 $ 22.00 $ 22.00 $23.16 $24.44 $24.44
------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
PRO FORMA DISTRIBUTABLE CASH
-----------------------------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earned $ 2.17 $ 2.84 $ 2.64 $ 2.87 $ 2.90 $ 2.61
Paid 2.30 2.30 2.30 2.30 2.30 2.30
Yield 10.0% 10.0% 10.0% 9.5% 9.0% 9.0%
Unit Value $ 23.00 $ 23.00 $ 23.00 $24.21 $25.56 $ 25.56
-------------------------------------------------------------------------------------------------
</TABLE>
----------------------------------------------------------------------------
24
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
ECONOMICS OF THE TRANSACTION
---------------------------------------------------------------------------
EFFECT OF THE TRANSACTION ON STAR UNIT COVERAGE -- BASE CASE
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
CURRENT COVERAGE
-------------------------------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Coverage on Common Units 1.7x 1.9x 1.8x 1.9x 2.0x 2.1x
Coverage on Total Units 0.9 1.0 1.0 1.0 1.0 1.1
--------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
PRO FORMA COVERAGE/(1)/
-------------------------------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Coverage on Common Units 1.5x 2.0x 1.9x 2.1x 2.2x 2.3x
Coverage on Total Units 0.9 1.2 1.2 1.3 1.4 1.4
--------------------------------------------------------------------------------------------------
</TABLE>
________________________________
/(1)/ Based on $2.30 minimum quarterly distribution.
---------------------------------------------------------------------------
25
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
ECONOMICS OF THE TRANSACTION
---------------------------------------------------------------------------
EFFECT OF TRANSACTION ON STAR UNIT COVERAGE -- OPTIMISTIC CASE
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
CURRENT COVERAGE
----------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Coverage on Common Units 1.7x 1.9x 2.0x 2.1x 2.2x 2.4x
Coverage on Total Units 0.9 1.0 1.1 1.1 1.2 1.3
-----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
PRO FORMA COVERAGE /(1)/
----------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Coverage on Common Units 1.5x 2.0x 2.1x 2.4x 2.5x 2.6x
Coverage on Total Units 0.9 1.2 1.3 1.5 1.6 1.6
-----------------------------------------------------------------------------------
</TABLE>
____________________________
(1) Based on $2.30 minimum quarterly distribution.
----------------------------------------------------------------------------
26
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
ECONOMICS OF THE TRANSACTION
---------------------------------------------------------------------------
EFFECT OF TRANSACTION ON STAR UNIT COVERAGE -- OPTIMISTIC CASE
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
CURRENT COVERAGE
----------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Coverage on Common Units 1.7x 1.9x 1.8x 1.9x 2.0x 2.1x
Coverage on Total Units 0.9 1.0 1.0 1.0 1.0 1.1
-----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
PRO FORMA COVERAGE /(1)/
----------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Coverage on Common Units 1.5x 2.0x 1.9x 2.0x 2.0x 1.9x
Coverage on Total Units 0.9 1.2 1.2 1.3 1.3 1.1
-----------------------------------------------------------------------------------
</TABLE>
__________________________
(1) Based on $2.30 minimum quarterly distribution.
---------------------------------------------------------------------------
27
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
PART V
COMPARABLE MLP ANALYSIS
---------------------------------------------------------------------------
28
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
COMPARABLE MLP ANALYSIS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
COMPARATIVE ANALYSIS OF SELECTED MLPS
----------------------------------------------------------------------------------------------------------------------------
($ in millions, except per share data) MARKET IMPLIED
VALUE OF MARKET IMPLIED INDICATED
CLOSING PUBLIC VALUE OF MARKET DISTRIBUTION IMPLIED
COMPANY 22-JUL-97 EQUITY EQUITY/(1)/ CAPITALIZATION/(2)/ PER UNIT YIELD/(3)/
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PIPELINES
Buckeye Partners/(4)/ $49.13 $592.8 $ 598.8 $ 823.9 $3.52 7.2%
Kinder Morgan Energy Partners/(5)/ 62.13 404.4 412.7 564.5 4.00 6.4
EOTT Energy Partners 18.88 188.8 362.7 442.9 1.90 10.1
Genesis Energy/(6)/ 20.38 175.7 224.1 212.6 2.00 9.8
Kaneb Pipe Line Partners 358.3 489.9 627.9
Senior Preference Units 30.63 2.40 7.8
Preference Units 29.31 2.40 8.2
Lakehead Pipeline Partners/(7)/ 41.88 841.3 1,025.6 1,445.2 3.12 7.5
Leviathan Gas Pipeline Partners/(8)/ 25.06 453.0 623.2 848.4 1.80 7.2
Northern Border Partners/(9)/ 29.94 592.2 800.4 1,295.8 2.20 7.3
Santa Fe Pacific Pipeline Partners 40.38 773.1 788.9 1,166.9 3.00 7.4
TEPPCO Partners/(10)/ 49.00 710.5 728.8 1,022.4 3.20 6.5
PIPELINE MEAN $2.69 7.8%
PIPELINE MEDIAN 2.40 7.4
PROPANE
AmeriGas Partners $25.69 $566.7 $1,096.8 $1,823.7 $2.20 8.6%
Cornerstone Propane Partners/(11)/ 22.50 221.0 377.0 608.7 2.16 9.6
Ferrellgas Partners/(12)/ 22.69 331.5 745.1 1,220.0 2.00 8.8
Heritage Propane Partners 22.75 97.5 185.4 324.4 2.00 8.8
National Propane Partners $20.38 $136.5 $ 233.6 $ 358.8 $2.10 10.3%
Star Gas Partners 22.50 64.7 121.0 207.5 2.20 9.8
Suburban Propane Partners 19.25 415.1 564.2 1,106.7 2.00 10.4
PROPANE MEAN $2.09 9.5%
PROPANE MEDIAN 2.10 9.6
----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
------------------------------------------------------------------------------------------------------------------
COMPARATIVE ANALYSIS OF SELECTED MLPS
------------------------------------------------------------------------------------------------------------------
($ in millions, except per share data) LTM DISTRIBUTABLE CASH FLOW/ LTM DISTRIBUTABLE CASH FLOW/
---------------------------- ----------------------------
INDICATED INDICATED LTM LTM
DISTRIBUTION DISTRIBUTION DISTRIBUTION DISTRIBUTION
COMPANY TO PUBLIC UNITS TO TOTAL UNITS TO PUBLIC UNITS TO TOTAL UNITS
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PIPELINES
Buckeye Partners/(4)/ 1.1x 1.0x 1.2x 1.2x
Kinder Morgan Energy Partners/(5)/ 0.5 0.5 0.8 0.8
EOTT Energy Partners 2.0 1.1 2.0 1.1
Genesis Energy/(6)/ 1.2 1.0 NM NM
Kaneb Pipe Line Partners
Senior Preference Units 2.5 1.1 2.6 1.1
Preference Units 1.5 1.1 1.6 1.1
Lakehead Pipeline Partners/(7)/ 1.6 1.3 1.9 1.6
Leviathan Gas Pipeline Partners/(8)/ 2.3 1.7 2.8 2.1
Northern Border Partners/(9)/ 1.8 1.3 1.8 1.3
Santa Fe Pacific Pipeline Partners 1.4 1.4 1.4 1.4
TEPPCO Partners/(10)/ 1.3 1.2 1.4 1.3
PIPELINE MEAN 1.6X 1.2X 1.7X 1.3X
PIPELINE MEDIAN 1.5 1.1 1.7 1.3
PROPANE
AmeriGas Partners 1.6x 0.8x 1.6x 0.8x
Cornerstone Propane Partners/(11)/ 1.2 0.7 NM NM
Ferrellgas Partners/(12)/ 1.8 0.8 1.8 0.8
Heritage Propane Partners 1.5 0.8 1.6 0.8
National Propane Partners 0.7x 0.4x 0.7x 0.4x
Star Gas Partners 1.6 0.9 1.6 0.9
Suburban Propane Partners 0.7 0.5 0.7 0.5
PROPANE MEAN 1.3X 0.7X 1.3X 0.7X
PROPANE MEDIAN 1.5 0.8 1.6 0.8
------------------------------------------------------------------------------------------------------------------
<CAPTION>
----------------------------------------------------------------------------------------------
COMPARATIVE ANALYSIS OF SELECTED MLPS
----------------------------------------------------------------------------------------------
($ in millions, except per share data)
LTD/MARKET EBITDA/ MARKET CAP/
COMPANY CAPITALIZATION INTEREST EXP. EBITDA
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PIPELINES
Buckeye Partners/(4)/ 24.0% 3.7x 10.1x
Kinder Morgan Energy Partners/(5)/ 28.4 2.6 16.8
EOTT Energy Partners 0.0 11.6 9.2
Genesis Energy/(6)/ 0.0 NM 8.9
Kaneb Pipe Line Partners 22.1 5.6 10.0
Senior Preference Units
Preference Units
Lakehead Pipeline Partners/(7)/ 32.0 3.9 9.9
Leviathan Gas Pipeline Partners/(8)/ 25.8 NM 10.2
Northern Border Partners/(9)/ 25.9 3.7 10.7
Santa Fe Pacific Pipeline Partners 30.4 3.6 8.8
TEPPCO Partners/(10)/ 30.3 3.1 9.8
PIPELINE MEAN 21.9% 4.8X 10.5X
PIPELINE MEDIAN 25.8 3.7 9.9
PROPANE
AmeriGas Partners 37.7% 2.4x 11.8x
Cornerstone Propane Partners/(11)/ 38.2 2.7 18.4
Ferrellgas Partners/(12)/ 37.6 2.5 10.6
Heritage Propane Partners 41.2 2.3 11.9
National Propane Partners 35.7% 2.0x 14.0x
Star Gas Partners 41.0 2.9 10.4
Suburban Propane Partners 38.7 2.7 12.3
PROPANE MEAN 38.6% 2.5X 12.8X
PROPANE MEDIAN 38.2 2.5 11.9
----------------------------------------------------------------------------------------------
</TABLE>
____________________
(1) Implied Market Value of Equity implies value of total equity based on
value of public units.
(2) Implied Market Capitalization equals Implied Market Value of Equity
plus net debt and other long-term liabilities.
(3) Based on most recent distribution declared on an annualized basis.
(4) Indicated Distribution per Unit reflects a Quarterly Distribution of
$0.88 as proposed by the General Partner on June 24, 1997. The
increased distribution is subject to approval by the G.P.'s Board of
Directors and will be paid August 1997 to unitholders of record on
June 16, 1997.
(5) Pro forma for the expected distribution increase from $0.63 per unit
per quarter to $1.00 per unit.
(6) Pro forma for the public offering of 7,500,000 Common Units.
(7) Indicated Distribution per Unit reflects an increased Quarterly
Distribution of $0.78 as announced on July 17, 1997. The Increased
distribution is payable August 14, 1997, to unitholders of record on
July 31, 1997.
(8) Indicated Distribution per Unit reflects an increased Quarterly
Distribution of $0.45 as announced on July 21, 1997. The Increased
distribution is payable August 14, 1997, to unitholders of record on
July 31, 1997.
(9) Distributable Cash Flow is based upon income statement items adjusted
for approximate 30% minority interest.
(10) Indicated Distribution per Unit reflects a Quarterly Distribution of
$0.80 as announced by the General Partner on July 14, 1997. The
increased distribution is payable August 8, 1997 to unitholders of
record on July 31, 1997.
(11) Pro forma for the initial public offering of 9,821,000 limited partner
units and the private placement of $220 million of Senior Secured
Notes.
(12) Pro forma for the $90 million acquisition of Skelgas on April 30,
1996.
________________________________________________________________________________
29
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
COMPARABLE MLP ANALYSIS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
DIVERSIFIED MLPS
------------------------------------------------------------------------------------------------------------
IMPLIED MARKET
DIVERSIFIED IMPLIED VALUE OF EQUITY LTM DISTRIBUTION COVERAGE
---------------------------
LINES OF BUSINESS YIELD /(1)/ (MILLIONS) COMMON UNITS TOTAL UNITS
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Genesis Energy Crude pipeline 9.8% $224.1 1.2x 1.0x
Crude marketing
Kaneb Pipe Line Products pipeline 8.2% $489.9 1.5 1.1
Storage terminals
Kinder Morgan Products pipeline 6.4% $412.7 0.8 0.8
Coal storage
Coal transfer
NGL fractionation
Gas processing
Leviathan Gas Pipeline Gas pipeline 7.2% $623.2 2.3 1.7
Crude pipeline
Oil & gas production
------------------------------------------------------------------------------------------------------------
</TABLE>
_____________________
(1) As of 7/22/97.
- --------------------------------------------------------------------------------
30
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
STEPS OF THE TRANSACTION AND TAX IMPLICATIONS
---------------------------------------------------------------------------
31
<PAGE>
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
STEPS OF THE TRANSACTION AND TAX IMPLICATIONS
-----------------------------------------------------------------------------
STEPS OF THE TRANSACTION
. STEP ONE: Star Gas Corp. merges into Petro. Petro obtains from Star Gas
--------
Corp. the GP units of MLP and OLP and MLP subordinated units. Petro
transfers the GP units to an LLC. The subordinated units are designated
Senior Subordinated Units.
. STEP TWO: Petro transfers assets to MLP in exchange for additional Senior
--------
Subordinated Units so as to have a total number of Senior Subordinated
Units equal in value to the value of the Petro Class A Common Stock held
by the public.
. STEP THREE: Petro exchanges all LLC shares for an equivalent value of
----------
Class C shares held by Petro insiders.
. STEP FOUR: The Petro insiders transfer their remaining Class A and Class C
---------
Stock to the MLP in exchange for Junior Subordinated Units.
. STEP FIVE: OLP organized Newco. MLP transfers to OLP and OLP transfer to
---------
Newco, all Petro shares owned by the MLP, as acquired by MLP from the
Petro insiders.
. STEP SIX: Newco merges with and into Petro. Class A Shares owned by the
--------
public are changed into Senior Subordinated Units. Class A and Class C
shares owned by Newco are canceled. Newco shares owned by OLP are changed
into Class A Petro shares.
CORRESPONDING TAX IMPLICATION
. Tax free.
. Tax free.
. This triggers tax at Petro measured by the value of the LLC shares in
excess of Petro's basis in them and tax at the Petro insider level
measured by the value of the LLC shares in excess of their basis in the
Petro shares surrendered.
. Tax free.
. Tax free.
. This step is tax free to Newco and OLP. Petro will recognize gain equal to
the value of the Senior Subordinated Units in excess of Petro's basis in
them. The public shareholders will recognize gain (or loss) measured by
the excess (or deficit) in value of the Senior Subordinated Units as
compared to their basis in the Petro Class A Common Stock.
-----------------------------------------------------------------------------
32
<PAGE>
EXHIBIT 99(B)(4)
- --------------------------------------------------------------------------------
Confidential
- --------------------------------------------------------------------------------
STAR GAS PARTNERS, L.P.
BOARD OF DIRECTORS PRESENTATION
January 26, 1998
<PAGE>
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
---------------------------------------------------------------------------
I SITUATION ANALYSIS
II PETRO'S STRATEGY
III THE TRANSACTION
IV BENEFITS OF THE TRANSACTION
V ECONOMICS OF THE TRANSACTION
VI COMPARABLE MLP ANALYSIS
Exhibit I Steps of the Transaction and Tax Implications
---------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
PART I
SITUATION ANALYSIS
---------------------------------------------------------------------------
1
<PAGE>
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
SITUATION ANALYSIS
---------------------------------------------------------------------------
PROPANE BUSINESS
. Pricing on all acquisitions has become extremely competitive as over $1.5
billion of equity has come into the industry since 1994.
. Large acquisitions have been scarce and multiples for even small deals
have expanded.
. Wholesale price spike during the 1996-1997 season revealed another level
of uncertainty, even for those companies (like Star) which profited from
the spike.
. Warm winter in the Northeast compounded the problem for many players.
. The market is starting to question whether propane MLPs are really growth
vehicles, as many have failed to demonstrate internal growth.
. The market is also starting to question if the weather is ever normal (it
always seems to be abnormally warm in some section, which more than
offsets good results elsewhere).
---------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
SITUATION ANALYSIS
---------------------------------------------------------------------------
IN SPITE OF SOLID PERFORMANCE AND THE RECENT PEARL ACQUISITION, STAR HAS
BEEN UNABLE TO IMPROVE ITS VALUATION RELATIVE TO OTHER MLPs
STAR GAS YIELD
[GRAPH APPEARS HERE]
________________________
(1) Index is a composite of APU, CNO, FGP, HPG, NPL and SPH.
---------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
SITUATION ANALYSIS
---------------------------------------------------------------------------
CURRENT LTM COVERAGES ON TOTAL UNITS
[GRAPH APPEARS HERE]
CURRENT YIELDS
[GRAPH APPEARS HERE]
* ONLY NATIONAL PROPANE AND SUBURBAN -- WHICH ARE HAVING OPERATIONAL
PROBLEMS -- TRADE AT A HIGHER YIELD THAN STAR.
__________________
(1) As of 1/23/98.
---------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
SITUATION ANALYSIS
---------------------------------------------------------------------------
IMPLIED MARKET VALUE OF EQUITY OF SELECTED PROPANE MLPS (CURRENT IMPLIED
YIELD) /(1)/
[GRAPH APPEARS HERE]
* THE LARGER PROPANE MLPS HAVE GREATER MARKET LIQUIDITY AND INVESTOR
AWARENESS AND ARE SUBSEQUENTLY OFTEN REWARDED WITH LOWER YIELDS.
* AMERIGAS AND STAR HAVE COMPARABLE COVERAGES, BUT AMERIGAS TRADES AT A
100 B.P. PREMIUM - PRIMARILY DUE TO SIZE.
____________________
(1) As of 1/23/98. Implied Market Value of Equity includes all Common,
Subordinated and GP interests.
---------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
SITUATION ANALYSIS
---------------------------------------------------------------------------
STAR CONTINUES TO LAG BEHIND OTHER MLPS IN TERMS OF ACQUISITIONS, WHERE
STAR'S ABILITY TO COMPETE IS LIMITED
. Management's limited propane experience lowers deal flow
. Geographic concentration limits "blend-in" opportunities
. Larger and better capitalized players compete for the same assets
---------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
SITUATION ANALYSIS
---------------------------------------------------------------------------
SINCE GOING PUBLIC, MOST PROPANE MLPS HAVE MADE ACQUISITIONS AT A
DISAPPOINTING PACE
PERCENTAGE GALLONS ACQUIRED AS A % OF ORIGINAL GALLONS/(1)/
[GRAPH APPEARS HERE]
* INVESTORS HAVE RESPONDED FAVORABLY TO ACQUISITION OPPORTUNITIES. THE
ENTITIES WHICH HAVE GROWN THE MOST ON A PERCENTAGE BASIS (FGP AND HPG)
TRADE AT PREMIUM MULTIPLES.
____________
(1) As of 1/23/98.
---------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
SITUATION ANALYSIS
-------------------------------------------------------------------------
HEATING OIL BUSINESS
. Petro remains the dominant force in the heating oil business, selling at
least 3 times as much as its nearest competitor.
. Petro also dominates the acquisition market, acquiring a substantial
share of all heating oil businesses sold.
. While the company has constantly made acquisitions over the last 5
years, higher than expected attrition rates have resulted in little
EBITDA growth.
. Operational changes which were instituted on a small scale in 1996-1997
are expected to reduce the attrition rates over the next several years.
. It is anticipated that the acquisition market will continue to be strong
as more owners approach retirement age and capital gain tax relief
appears in sight.
---------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
PART II
PETRO'S STRATEGY
---------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
PETRO'S STRATEGY
---------------------------------------------------------------------------
PETRO WILL TAKE ADVANTAGE OF FAVORABLE CONDITIONS IN THE HEATING OIL MARKET
. Significant competitive advantages.
-- Industry is populated by thousands of relatively small local family
owned businesses
-- Higher concentration of customers than in the propane industry
creates critical mass
-- Sufficient financial resources to make key strategic acquisitions
-- Management openness and ability to modify historical operating
practices
. Consumer attitudes facilitate creation of a brand image.
-- Utility product that is delivered without affirmative purchase
decision
-- 92% of customers do not know competitor's prices
-- 35% of consumers do not know the name of another heating oil
company
-- Only 34% know the name of only one other company (no one specific
competitor)
. Unique size provides significant opportunities.
-- Engage professional management and achieve efficient organizational
structure
-- Enhance MIS and communication technology
-- Operating and marketing efficiencies
---------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
PETRO'S STRATEGY
---------------------------------------------------------------------------
ANTICIPATED BENEFITS FROM STRATEGY
. Reduced operating costs and increased profitability.
. Growth through internal marketing.
. Attract new customers.
. Retain existing customers.
. Improve products and services.
---------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
PETRO'S STRATEGY
---------------------------------------------------------------------------
BY CREATING A BRAND IMAGE, PETRO CAN TARGET A NEW CUSTOMER BASE
. Consumers moving into oil heated homes.
. Other fuel oil dealers' dissatisfied customers.
-- Represents 8% to 10% of market
. Customers of other nationally branded companies offering home delivered
products and services.
-- HFS real estate family of companies (Century 21, ERA, Coldwell
Banker)
-- Security systems
-- Bottled water
-- Extermination
-- Electricity
-- Lawn care
* CREATING A BRAND IMAGE WOULD PROVIDE PETRO THE OPPORTUNITY TO FILL THE
VOID IN THE INDUSTRY BY BECOMING THE ONLY CONSUMER-RECOGNIZABLE HEATING
OIL COMPANY.
---------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
PETRO'S STRATEGY
---------------------------------------------------------------------------
IMPROVE EXISTING CUSTOMER RETENTION
. Improve product thereby increasing customer satisfaction and reducing
triggering events.
-- Reduce oil runouts
-- Reduce incomplete and repeat equipment repairs
-- Provide unique on-time repairs
. All employees function as salesmen.
. Segmented and unbundled pricing.
. Create deeper customer relationships.
---------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
PETRO'S STRATEGY
---------------------------------------------------------------------------
CREATE SEGMENTED AND UNBUNDLED PRICING
. Heating equipment repair and maintenance revenues lower than cost.
-- Bundled with and subsidized by oil price
. Unlimited annual service contracts.
. Tailor unbundled pricing packages for different customer segments.
-- Shift charges away from more visible oil to less sensitive equipment
repair
-- Replace unlimited service contracts with co-pay program based on
usage
---------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
PETRO'S STRATEGY
---------------------------------------------------------------------------
CREATE DEEPER CUSTOMER RELATIONSHIPS
. Offer rationally related products requiring similar operating expertise.
-- Air conditioning
-- Electric repair
-- Plumbing
. Create affinity group buying benefits with cross marketing partners.
-- Security systems
-- Bottled water
-- Extermination
-- Electricity
-- Lawn care
---------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
Part III
THE TRANSACTION
---------------------------------------------------------------------------
16
<PAGE>
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
THE TRANSACTION
--------------------------------------------------------------------------
OVERVIEW
. Star's limited size relative to other comparable MLPs restricts both
its financial flexibility and access to strategic acquisitions.
. We believe that a public stock corporation is not the optimal format
for Petro.
__ No direct comparables
__ Rapid amortization of customer lists results in no earnings
__ Perceived limited growth in heating oil industry
__ Small capitalization results in limited research coverage
. Furthermore, Petro's leveraged capital structure also limits its
financial flexibility and growth opportunities.
* AS A RESULT, STAR GAS TRADES AT A SLIGHT DISCOUNT TO ITS PEERS, WHILE
PETRO'S STOCK HAS PERFORMED POORLY AND IS NOT LIKELY TO ACHIEVE FULL
VALUATION EVEN IF OPERATIONS IMPROVE.
--------------------------------------------------------------------------
17
<PAGE>
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
THE TRANSACTION
--------------------------------------------------------------------------
IN ORDER TO ADDRESS THESE VALUATION ISSUES, STAR GAS SHOULD CONSIDER THE
BENEFITS OF A MERGER WITH PETRO
. The combination of the two companies would result in a sizable MLP
(approximately $325 million implied equity value) which translates
into better valuation and greater liquidity.
. The new entity would have substantially better access to capital to
fund future growth.
. Concurrent with the merger, the issuance of new equity would
restructure and delever the balance sheet.
. The restructuring would be accretive to distributable cash flow.
* THE COMBINED ENTITY WOULD HAVE THE INVESTMENT STORY TO ATTRACT
RESEARCH COVERAGE AND WOULD BENEFIT BOTH STAR GAS AND PETRO SHARE/UNIT
HOLDERS.
--------------------------------------------------------------------------
18
<PAGE>
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
THE TRANSACTION
--------------------------------------------------------------------------
CERTAIN FACTORS MUST BE INHERENT TO THE TRANSACTION IN ORDER FOR THE MERGER
TO BE ATTRACTIVE TO STAR UNITHOLDERS
. The transaction must be substantially accretive to Star Unitholders
based on current operations.
. Petro shareholders must be subordinate to existing Star Unitholders.
. The indicated distribution and Minimum Quarterly Distribution ("MQD")
must be increased from their current levels.
--------------------------------------------------------------------------
19
<PAGE>
- -------------------------------------------------------------------------------
Star Gas Partners L.P.
- -------------------------------------------------------------------------------
THE TRANSACTION
--------------------------------------------------------------------------
THE TRANSACTIN INVOLVES TWO SEPARATE STAGES:
--------------------------------------------------------------------------
STAGE 1-- THE EXCHANGE
--------------------------------------------------------------------------
PETRO SHAREHOLDERS EXCHANGE THEIR COMMON STOCK FOR STAR GAS MASTER LIMIT
PARTNERSHIP UNITS AT $3.15/SHARE
. Shareholders who hold only Class A shares exchange into Senior
Subordinated MLP units.
. Senior Subordinated MLP Units valued at + 10% discount to Common
Units.
. "Inside" shareholders /(1) /exchange either into Senior Subordinated
MLP Units or Subordinated Units plus the General Partnership Interest.
. Senior Subordinated Units offered to "Insiders" will be capped at 3.5
million Petro shares in order to provide adequate coverage to Star
Common Units.
. Subordinated Units valued at + 20% discount to Common Units.
. All Senior Subordinated and Subordinated Units convert to Common Units
after 3 years of "Earn & Pay" of $2.30 (i.e. increase the MQD on the
Common Units).
--------------------------------------------------------------------------
___________________
(1) Insiders for the purposes of this dicussion are those individuals who
own Class C and Class A common shares.
--------------------------------------------------------------------------
20
<PAGE>
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
THE TRANSACTION
--------------------------------------------------------------------------
THE TRANSACTION INVOLVES TWO SEPARATE STAGES:
--------------------------------------------------------------------------
STAGE 2 -- THE RECAPITALIZATION
--------------------------------------------------------------------------
APPROXIMATELY $320 MILLION OF PETRO DEBT AND PREFERRED STOCK ARE REFINANCED
. Existing issues will be either redeemed, exchanged, defeased or
tendered for, depending on issue.
. Approximately $140 million of new Star equity will be raised through
the sale of Common Units.
. Approximately $125 million of new debt will be issued.
--------------------------------------------------------------------------
--------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
STAR GAS PARTNERS, L.P
- --------------------------------------------------------------------------------
THE TRANSACTION
---------------------------------------------------------------------------
[GRAPH APPEARS HERE]
* PETRO PUBLIC SHAREHOLDERS EXCHANGE FOR SENIOR SUBORDINATED; INSIDERS
EXCHANGE FOR A COMBINATION OF SENIOR SUBORDINATED AND/OR SUBORDINATED +
G.P. UNITS. THE MLP SELLS COMMON UNITS AND USES THE PROCEEDS TO
RECAPITALIZE AND REFINANCE.
---------------------------------------------------------------------------
22
<PAGE>
- --------------------------------------------------------------------------------
STAR GAS PARTNERS, L.P
- --------------------------------------------------------------------------------
THE TRANSACTION
---------------------------------------------------------------------------
STAGE 1 -- THE EXCHANGE
<TABLE>
<CAPTION>
CURRENT CONSIDERATION RECEIVED
-------------------------------------------------------- ----------------------------------------------------------
SHARES UNITS
PETRO SHAREHOLDER TYPE (000'S) TYPE OF MLP INTEREST (000'S)
<S> <C> <C> <C>
Holders of Class A Only 16,355 Senior Subordinated Units 2,464
Holders of Class A and C Shares
Shares Permitted To Be Exchanged
Into Senior Subordinated Units 3,500 Senior Subordinated Units 527
Shares To Be Exchanged Into
Subordinated Units and GP Interest 5,904 Subordinated and General Partner Interest 1,296
------ -----
Sub Total 9,404
------
TOTAL 25,759 TOTAL 4,287
-------------------------------------------------------- ----------------------------------------------------------
</TABLE>
STAGE 2 -- THE RECAPITALIZATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
UNITS OUTSTANDING AT MLP AFTER RECAPITALIZATION (000'S)
--------------------------------------------------------------------------------
Common Units
<S> <C>
Currently Outstanding 3,832
Newly Issued ($137.6 million) 6,116
------
Total 9,947
Senior Subordinated Units 2,991
Subordinated Units and GP Interest 1,296
------
TOTAL 14,234
--------------------------------------------------------------------------------
</TABLE>
---------------------------------------------------------------------------
23
<PAGE>
- --------------------------------------------------------------------------------
STAR GAS PARTNERS, L.P
- --------------------------------------------------------------------------------
PART IV
BENEFITS OF THE TRANSACTION
---------------------------------------------------------------------------
24
<PAGE>
- --------------------------------------------------------------------------------
STAR GAS PARTNERS, L.P
- --------------------------------------------------------------------------------
BENEFITS OF THE TRANSACTION
---------------------------------------------------------------------------
AS A RESULT OF THE TRANSACTIONS, STAR HOLDERS WILL BENEFIT FROM THE
FOLLOWING:
. Increased earnings and distributions.
<TABLE>
<CAPTION>
1997
------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ACTUAL NORMALIZED 1998 (1)
------------------------------------------------------ ------------------------
FROM TO FROM TO FROM TO
----------------------------------------------------------------------------------------------------------------------------
Distributable Cash per unit $2.06 $2.19 $2.06 $2.65 $2.27 $2.93
Distributions per unit $2.20 $2.30 $2.20 $2.30 $2.20 $2.30
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
. Increase MQD to $2.30 per unit.
. Higher total distribution coverage.
<TABLE>
<CAPTION>
1997
------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ACTUAL NORMALIZED 1998 /(1)/
------------------------------------------------------ ----------------------------
From TO FROM TO FROM TO
------------------------------------------------------------------------------------------- ----------------------------
Coverage on Common Units 1.6x 1.4x 1.6x 1.7x 1.7x 1.9x
Coverage on Total Units 0.9x 1.0x 0.9x 1.2x 1.0x 1.3x
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
. Larger size equity market capitalization.
. A vehicle for growth in otherwise stagnant market.
___________________
(1) Based on projected 1998 results. Assumes annually MQD of $2.20
---------------------------------------------------------------------------
25
<PAGE>
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
BENEFITS OF THE TRANSACTION
--------------------------------------------------------------------------
CHANGE IN DISTRIBUTIONS OF SELECTED MLPS SINCE IPO /(1)/
[GRAPH APPEARS HERE]
* INVESTORS HAVE REWARDED INCREASED DISTRIBUTIONS WITH ATTRACTIVE
VALUATIONS.
______________________
(1) As of 1/23/98.
--------------------------------------------------------------------------
26
<PAGE>
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
BENEFITS OF THE TRANSACTION
--------------------------------------------------------------------------
A MERGER WITH PETRO WILL RESPOND TO SEVERAL IMPORTANT INVESTOR ISSUES
--------------------------------------------------------------------------
Q: How will the market value the mixed MLP?
A: Growth and ability to make distributions are the key considerations for
valuing an MLP. The merger provides the size, business mix and
flexibility that investors are seeking. Several diversified MLPs exist
and perform favorably compared to their peers.
--------------------------------------------------------------------------
DIVERSIFIED MLPS
--------------------------------------------------------------------------
<TABLE>
<CAPTION>
IMPLIED MARKET VALUE
DIVERSIFIED IMPLIED OF EQUITY LTM DISTRIBUTION COVERAGE
-----------------------------
LINES OF BUSINESS YIELD /(1)/ (MILLIONS) /(1)/ COMMON UNITS TOTAL UNITS
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Genesis Energy Crude pipeline 10.2% $ 215.9 0.8x 0.6x
Crude marketing
Kaneb Pipe Line Products pipeline 7.7% $ 563.3 1.3 1.0
Storage terminals
Kinder Morgan Products pipeline 6.0% $ 536.4 0.7 0.7
Coal storage and transfer
NGL fractionation
Gas processing
Leviathan Gas Pipeline Gas pipeline 6.7% $ 745.9 2.0 1.5
Crude pipeline
Oil & gas production
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* APPROXIMATELY 45% OF PIPELINE MLPS ARE DIVERSIFIED AND HAVE COMPARABLE
YIELDS RELATIVE TO PURE-PLAY MLPS.
__________________________
(1) As of 1/23/98.
--------------------------------------------------------------------------
27
<PAGE>
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
BENEFITS OF THE TRANSACTION
---------------------------------------------------------------------------
INVESTOR ISSUES (CONT'D)
---------------------------------------------------------------------------
Q: The propane industry has low annual growth (1%-2%) versus the heating
oil industry which is declining (2%-4%) each year. Why should Star
enter an industry that experiences attrition?
A: While propane is a growth industry, there are several larger and better
capitalized companies that are actively taking advantage of industry
consolidation. As a result, average acquisition multiples have been bid
up to 7x EBITDA or higher. On the other hand, Petro is the dominant
player and leading consolidator in the heating oil market. As a result,
Petro has averaged 10 acquisitions each year since 1992 at an average
purchase multiple of approximately 4x EBITDA. As demonstrated below, an
acquisition at a 4x EBITDA multiple is profitable even taking into
account attrition:
---------------------------------------------------------------------------
ACQUISITION RATE OF RETURN
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
EBITDA PURCHASE INTERNAL RATE OF
GROWTH RATE (ATTRITION) MULTIPLE RETURN (IRR)
-----------------------------------------------------------------------
<S> <C> <C>
(6.0%) 4.0x 15.6%
(4.0%) 4.0x 19.3%
-----------------------------------------------------------------------
(2.0%) 4.0x 22.3%
-----------------------------------------------------------------------
1.5% 7.0x 15.9%
-----------------------------------------------------------------------
</TABLE>
---------------------------------------------------------------------------
28
<PAGE>
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
BENEFITS OF THE TRANSACTION
--------------------------------------------------------------------------
INVESTOR ISSUES (CONT'D)
--------------------------------------------------------------------------
Q: What initiatives is Petro taking to reverse its high attrition?
A: Petro's new strategic focus includes:
- Attracting new customers through brand imaging
- Cross marketing to new and existing customers
- Improving customer service
- Creating segmented and unbundled pricing
- Create deeper customer relationships through marketing related
services
--------------------------------------------------------------------------
* ALTHOUGH THE BENEFITS OF THESE INITIATIVES HAVE BEGUN TO BE REALIZED,
THE IMPLIED VALUE HAS NOT YET BEEN FACTORED INTO PETRO'S STOCK PRICE.
THESE IMPROVEMENTS WILL SIGNIFICANTLY BENEFIT THE COMBINED ENTITY.
--------------------------------------------------------------------------
29
<PAGE>
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
BENEFITS OF THE TRANSACTION
--------------------------------------------------------------------------
INVESTOR ISSUES (CONT'D)
--------------------------------------------------------------------------
Q: Why would Petro be interested in a merger with Star Gas?
A: Premium to market
- At $3.15 per share, the exchange represents approximately a
20% premium to the market
Higher valuation multiples
- MLPs typically trade at 10-11x EBITDA
Enhanced growth potential due to greater access to capital
- Branding and internal marketing
- Improved productivity through capital investment
- Acquisitions
Lower overall cost of capital
- New debt at +/- 8% vs. 12% existing debt
- Equity capital with limited upside
Greater size and liquidity
- Implied equity market value quintuples to over $325 million
Greater financial flexibility
- Extend maturities through refinancing
- Improved covenants due to investment grade rating
--------------------------------------------------------------------------
--------------------------------------------------------------------------
30
<PAGE>
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
BENEFITS OF THE TRANSACTION
---------------------------------------------------------------------------
INVESTOR ISSUES (CONT'D)
---------------------------------------------------------------------------
Q: What evidence is there that Petro's recent efforts to reduce costs and
manage attrition have been successful?
---------------------------------------------------------------------------
A:
<TABLE>
<CAPTION>
HEATING EQUIPMENT REPAIR AND
MAINTENANCE
12 MONTHS 1996 12 MONTHS 1997 IMPROVEMENT
---------------------- ---------------------- ------------------
<S> <C> <C> <C>
Runouts (per 100 deliveries) 0.99 0.68 31.3%
Reworks 25.9% 24.9% 3.9%
Incompletes 5.8% 2.6% 55.2%
Not-At-Homes /(1)/ 4.2% 2.1% 50.0%
Service Calls/8 Hours 5.41 5.24 (3.1)%
OIL DELIVERY
Deliveries/8 Hours 22.2 23.9 7.7%
Gallons/Hour 569 607 6.7%
-----------------------------------------------------------------------------------------------------------
</TABLE>
___________________________
(1) Based on performance in the first six months of the year; 3Q and 4Q
data is not available.
---------------------------------------------------------------------------
31
<PAGE>
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
PART V
ECONOMICS OF THE TRANSACTION
---------------------------------------------------------------------------
32
<PAGE>
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
TRANSACTION ASSUMPTIONS
---------------------------------------------------------------------------
PETROLEUM HEAT & POWER
<TABLE>
<CAPTION>
Base Case Pessimistic Case
----------------------------------------- ----------------------------------------
$3.5 Million Maint. CapEx $3.5 Million Maint. CapEx
30-Year Weather 30-Year Weather
$1.0 Million Annual Productivity Savings $1.0 Million Annual Productivity Savings
5.0x Acquisition Multiple 4.0x Acquisition Multiple
------------------------------------------ ----------------------------------------
Attrition Acquisitions Attrition Acquisitions
<S> <C> <C> <C> <C>
1998 4.0% $50.0 Million 4.0% $20.0 Million
1999 3.0 50.0 4.0 20.0
2000 2.0 50.0 4.0 20.0
2001 2.0 50.0 4.0 20.0
</TABLE>
STAR GAS PARTNERS
---------------------------------------------------------------------------
All Cases
---------------------------------------------------------------------------
$5.0 Million in Acquisitions per Year at 7.0x EBITDA
2% Internal Growth
$2.0 Million Internal Growth CapEx per Year
$3.0 Million in Maintenance CapEx per Year
---------------------------------------------------------------------------
---------------------------------------------------------------------------
33
<PAGE>
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
ECONOMICS OF THE TRANSACTION
--------------------------------------------------------------------------
EFFECT OF TRANSACTION ON STAR UNITHOLDER DISTRIBUTIONS AND UNIT VALUE --
BASE CASE
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
CURRENT DISTRIBUTABLE CASH
-------------------------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earned $ 2.06 $ 2.06 $ 2.27 $ 2.43 $ 2.57 $ 2.72
Paid 2.20 2.20 2.20 2.20 2.30 2.40
Yield 9.5% 9.5% 9.5% 9.0% 8.5% 8.5%
Unit Value $23.16 $23.16 $23.16 $24.44 $27.06 $28.24
------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
PRO FORMA DISTRIBUTABLE CASH
-------------------------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earned $ 2.19 $ 2.65 $ 2.93 $ 3.17 $ 3.54 $ 3.90
Paid 2.20 2.30 2.30 2.40 2.60 2.80
Yield 9.5% 9.5% 9.0% 8.0% 7.5% 7.0%
Unit Value $23.16 $24.21 $25.56 $30.00 $34.67 $40.00
------------------------------------------------------------------------------------------
</TABLE>
---------------------------------------------------------------------------
34
<PAGE>
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
ECONOMICS OF THE TRANSACTION
--------------------------------------------------------------------------
EFFECT OF TRANSACTION ON STAR UNITHOLDER DISTRIBUTIONS AND UNIT VALUE --
PESSIMISTIC CASE
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
CURRENT DISTRIBUTABLE CASH
---------------------------------------------------------------------------------------
ACTUAL 1997 /(1)/ NORMALIZED 1997 /(1)/ 1998 1999 2000 2001
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earned $ 2.06 $ 2.06 $ 2.27 $ 2.43 $ 2.57 $ 2.72
Paid 2.20 2.20 2.20 2.20 2.30 2.40
Yield 9.5% 9.5% 9.5% 9.0% 8.5% 8.5%
Unit Value $23.16 $23.16 $23.16 $24.44 $27.06 $28.24
----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
PRO FORMA DISTRIBUTABLE CASH
--------------------------------------------------------------------------------------
ACTUAL 1997 /(1)/ NORMALIZED 1997 /(1)/ 1998 1999 2000 2001
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earned $ 2.19 $ 2.65 $ 2.74 $ 2.80 $ 2.89 $ 2.93
Paid 2.20 2.30 2.30 2.30 2.35 2.45
Yield 9.5% 9.5% 9.5% 9.0% 8.5% 8.5%
Unit Value $23.16 $24.21 $24.21 $25.56 $27.65 $28.82
---------------------------------------------------------------------------------------------------------
</TABLE>
________________________________________
(1) 1997 is pro forma for acquisitions.
---------------------------------------------------------------------------
35
<PAGE>
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
ECONOMICS OF THE TRANSACTION
---------------------------------------------------------------------------
EFFECT OF TRANSACTION ON STAR UNIT COVERAGE -- BASE CASE
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
CURRENT COVERAGE
-------------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Coverage on Common Units 1.6x 1.6x 1.7x 1.8x 1.9x 2.1x
Coverage on Total Units 0.9 0.9 1.0 1.1 1.2 1.2
-------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
PRO FORMA COVERAGE /(1)/
------------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Coverage on Common Units 1.4x 1.7x 1.9x 2.1x 2.3x 2.6x
Coverage on Total Units 1.0 1.2 1.3 1.4 1.6 1.8
-------------------------------------------------------------------------------------
</TABLE>
___________________________________
(1) Based on $2.20 annual MQD.
---------------------------------------------------------------------------
36
<PAGE>
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
ECONOMICS OF THE TRANSACTION
--------------------------------------------------------------------------
EFFECT OF TRANSACTION ON STAR UNIT COVERAGE -- PESSIMISTIC CASE
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
CURRENT COVERAGE
------------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Coverage on Common Units 1.6x 1.6x 1.7x 1.8x 1.9x 2.1x
Coverage on Total Units 0.9 0.9 1.0 1.1 1.2 1.2
-------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
PRO FORMA COVERAGE /(1)/
------------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Coverage on Common Units 1.4x 1.7x 1.8x 1.8x 1.9x 1.9x
Coverage on Total Units 1.0 1.2 1.2 1.3 1.3 1.3
-------------------------------------------------------------------------------------
</TABLE>
__________________________________
(1) Based on $2.20 annual MQD.
---------------------------------------------------------------------------
37
<PAGE>
- -------------------------------------------------------------------------------
Star Gate Partners, L.P.
- -------------------------------------------------------------------------------
PART VI
COMPARABLE MLP ANALYSIS
---------------------------------------------------------------------------
38
<PAGE>
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
COMPARABLE MLP ANALYSIS
---------------------------------------------------------------------------
COMPARATIVE ANALYSIS OF SELECTED MLPS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
($ in millions, except per share data) MARKET IMPLIED
VALUE OF MARKET IMPLIED INDICATED
CLOSING PUBLIC VALUE OF MARKET DISTRIBUTION IMPLIED
COMPANY 23-JAN-98 EQUITY EQUITY/(1)/ CAPITALIZATION/(2)/ PER UNIT YIELD/(3)/
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Pipelines
Buckeye Partners/(4)/ $57.94 $ 774.1 $ 781.9 $1,005.7 $4.20 7.2%
Kinder Morgan Energy Partners/(5)/ 37.25 525.6 536.4 681.6 2.25 6.0
Kaneb Pipe Line Partners/(6)/ 446.0 563.3 696.9
Senior Preference Units 35.31 2.60 7.4
Preference Units 33.63 2.60 7.7
Lakehead Pipeline Partners 45.75 1,019.8 1,223.2 1,511.1 3.12 6.8
Leviathan Gas Pipeline Partners/(7)/ 30.00 542.3 745.9 975.4 2.00 6.7
Northern Border Partners/(8)/ 33.19 747.7 1,400.6 1,785.0 2.30 6.9
TEPPCO Partners/(9)/ 54.88 795.7 816.1 1,120.8 3.40 6.2
------------------------------------------------------------------------------------------------------------------------------
PIPELINE MEAN $2.81 6.9%
PIPELINE MEDIAN 2.60 6.9
------------------------------------------------------------------------------------------------------------------------------
Diversified
EOTT Energy Partners $18.63 $ 186.3 $ 357.9 $ 460.1 $1.90 10.2%
Genesis Energy 19.63 169.3 215.9 198.4 2.00 10.2
------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED MEAN $1.95 10.2%
DIVERSIFIED MEDIAN 1.95 10.2
------------------------------------------------------------------------------------------------------------------------------
Propane
AmeriGas Partners $26.25 $ 579.1 $1,120.8 $1,886.3 $2.20 8.4%
Cornerstone Propane Partners 23.00 247.5 407.4 661.6 2.16 9.4
Ferrellgas Partners 22.13 325.3 706.5 1,246.3 2.00 9.0
Heritage Propane Partners 24.31 113.0 207.2 367.9 2.00 8.2
National Propane Partners $21.94 $ 147.0 $ 256.7 $ 395.5 $2.10 9.6
Star Gas Partners 23.50 90.0 149.3 238.3 2.20 9.4
Suburban Propane Partners 19.63 423.2 575.2 1,102.7 2.00 10.2
------------------------------------------------------------------------------------------------------------------------------
PROPANE MEAN $2.09 9.2%
PROPANE MEDIAN 2.10 9.4
------------------------------------------------------------------------------------------------------------------------------
Timber
Crown Pacific Partners, L.P $25.94 $ 553.3 $ 717.4 $1,134.0 $2.15 8.3%
Plum Creek Timber, L.P./(10)/ 32.31 1,496.8 1,995.8 2,637.8 2.20 6.8
U.S. Timberlands, L.P./(11)/ 21.25 182.3 275.1 498.6 2.00 9.4
------------------------------------------------------------------------------------------------------------------------------
TIMBER MEAN $2.12 8.2%
TIMBER MEDIAN 2.15 8.3
------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
LTM DISTRIBUTABLE CASH FLOW/
----------------------------
INDICATED INDICATED
DISTRIBUTION DISTRIBUTION LTD/MARKET EBITDA/ MARKET CAP/
COMPANY TO PUBLIC UNITS TO TOTAL UNITS CAPITALIZATION INTEREST EXP. EBITDA
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Pipelines
Buckeye Partners/(4)/ 0.8x 0.8x 18.8% 4.0x 11.7x
Kinder Morgan Energy Partners/(5)/ 0.7 0.7 19.2 3.1 17.2
Kaneb Pipe Line Partners/(6)/ 19.8 5.7 10.8
Senior Preference Units 2.3 1.0
Preference Units 1.3 1.0
Lakehead Pipeline Partners 1.5 1.2 30.6 3.8 10.3
Leviathan Gas Pipeline Partners/(7) 2.0 1.5 22.6 6.4 10.9
Northern Border Partners/(8)/ 1.3 1.0 24.1 4.0 11.5
TEPPCO Partners/(9)/ 1.4 1.4 27.6 3.5 9.9
------------------------------------------------------------------------------------------------------------------------------
PIPELINE MEAN 1.4X 1.1X 23.2% 4.3X 11.8X
PIPELINE MEDIAN 1.4 1.0 22.6 4.0 10.9
------------------------------------------------------------------------------------------------------------------------------
Diversified
EOTT Energy Partners 0.7x 0.4x 0.0% 4.3x 18.1x
Genesis Energy 0.8 0.6 0.0 NM 12.0
------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED MEAN 0.8X 0.5X 0.0% 4.3X 15.0X
DIVERSIFIED MEDIAN 0.8 0.5 0.0 4.3 15.0
------------------------------------------------------------------------------------------------------------------------------
Propane
AmeriGas Partners 2.0x 1.0x 36.3% 2.6x 11.0x
Cornerstone Propane Partners 0.7 0.5 38.1 2.1 16.8
Ferrellgas Partners 1.8 0.8 39.5 2.4 11.3
Heritage Propane Partners 1.5 0.8 44.0 2.3 12.4
National Propane Partners 1.1 0.6 34.9 2.5 13.0
Star Gas Partners 1.4 0.9 40.3 3.0 10.2
Suburban Propane Partners 0.8 0.6 38.8 2.7 12.0
------------------------------------------------------------------------------------------------------------------------------
PROPANE MEAN 1.3X 0.7X 38.8% 2.5X 12.4X
PROPANE MEDIAN 1.4 0.8 38.8 2.5 12.0
------------------------------------------------------------------------------------------------------------------------------
Timber
Crown Pacific Partners, L.P 1.2x 0.9x 35.9% 2.9x 10.5x
Plum Creek Timber, L.P./(10)/ 1.8 1.3 28.2 4.2 10.3
U.S. Timberlands, L.P./(11)/ NM NM 45.1 1.2 17.3
------------------------------------------------------------------------------------------------------------------------------
TIMBER MEAN 1.5X 1.1X 36.4% 2.7X 12.7X
TIMBER MEDIAN 1.5 1.1 35.9 2.9 10.5
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Implied Market Value of Equity implies value of total equity based on
value of public units.
(2) Implied Market Capitalization equals Implied Market Value of Equity
plus net debt and other long-term liabilities.
(3) Based on most recent distribution declared on an annualized basis.
(4) Indicated Distribution per Unit reflects an increased Quarterly
Distribution of $1.05 as announced on October 23, 1997. The increased
distribution is payable November 28, 1997, to unitholders of record on
November 5, 1997.
(5) Not pro forma for the announced merger with Santa Fe Pacific Pipeline.
Indicated Distribution per Unit reflects an increased Quarterly
Distribution of $0.5625 as announced on January 15, 1998 and payable
on February 17, 1998.
(6) Indicated Distribution per Unit reflects an increased Quarterly
Distribution of $0.65 as announced on October 9, 1997. The increased
distribution is payable November 14, 1997, to unitholders of record on
October 31, 1997.
(7) Indicated Distribution per Unit reflects an increased Quarterly
Distribution of $0.50 as announced on January 20, 1998. The increased
distribution is payable February 13, 1998, to all holders of record of
Preference Units and Common Units at the close of business on January
30, 1998.
(8) Distributable Cash Flow is based upon income statement items adjusted
for approximate 30% minority interest. Implied Market Value of Equity,
Implied Market Capitalization and Market Cap/EBITDA are not adjusted.
Indicated Distribution per Unit reflects an increased Quarterly
Distribution of $0.575 as announced on January 15, 1998. The increased
distribution is payable February 13, 1998, to unitholders of record on
January 30, 1998.
(9) Indicated Distribution per Unit reflects an increased Quarterly
Distribution of $0.85 as announced on January 16, 1998. The increased
distribution is payable February 6, 1998, to unitholders of record on
January 30, 1998.
(10) Implied Market Value of Equity and Implied Market Capitalization
include market value of GP interest based on its share of
distributions.
(11) Pro forma for the Initial Public Offering 11/13/97, the Weyerhauser
Acquisition, and for the refinancing of debt in connection with Ochoco
Acquisition. Not pro forma for any Ochoco Acquisition revenue.
---------------------------------------------------------------------------
39
<PAGE>
- -------------------------------------------------------------------------------
Star Gas Partners, L. P.
- -------------------------------------------------------------------------------
EXHIBIT I
STEPS OF THE TRANSACTION AND TAX IMPLICATIONS
---------------------------------------------------------------------------
40
<PAGE>
- -------------------------------------------------------------------------------
Star Gas Partners, L. P.
- -------------------------------------------------------------------------------
STEPS OF THE TRANSACTION AND TAX IMPLICATIONS
--------------------------------------------------------------------------
Steps of the Transaction
. STEP ONE: Star Gas Corp. merges into Petro. Petro obtains from Star Gas
--------
Corp. the GP units of MLP and OLP and MLP subordinated units. Petro
transfers the GP units to an LLC. The subordinated units are designated
Senior Subordinated Units.
. STEP TWO: Petro transfers assets to MLP in exchange for additional
--------
Senior Subordinated Units so as to have a total number of Senior
Subordinated Units equal in value to the value of the Petro Class A
Common Stock held by the public.
. STEP THREE: Petro exchanges all LLC shares for an equivalent value of
----------
Class C shares held by Petro insiders.
. STEP FOUR: The Petro insiders transfer their remaining Class A and Class
---------
C Stock to the MLP in exchange for Junior Subordinated Units.
. STEP FIVE: OLP organized Newco. MLP transfers to OLP and OLP transfer to
---------
Newco, all Petro shares owned by the MLP, as acquired by MLP from the
Petro insiders.
. STEP SIX: Newco merges with and into Petro. Class A Shares owned by the
--------
public are changed into Senior Subordinated Units. Class A and Class C
shares owned by Newco are canceled. Newco shares owned by OLP are
changed into Class A Petro shares.
Corresponding Tax Implication
. Tax free.
. Tax free.
. This triggers tax at Petro measured by the value of the LLC shares in
excess of Petro's basis in them and tax at the Petro insider level
measured by the value of the LLC shares in excess of their basis in the
Petro shares surrendered.
. Tax free.
. Tax free.
. This step is tax free to Newco and OLP. Petro will recognize gain equal
to the value of the Senior Subordinated Units in excess of Petro's basis
in them. The public shareholders will recognize gain (or loss) measured
by the excess (or deficit) in value of the Senior Subordinated Units as
compared to their basis in the Petro Class A Common Stock.
---------------------------------------------------------------------------
41
<PAGE>
PRELIMINARY REPORT TO
THE SPECIAL COMMITTEE OF GAS
A.G. EDWARDS & SONS, INC.
INVESTMENT BANKING
April 28, 1998
<PAGE>
TABLE OF CONTENTS
Section
-------
Introduction.................................... I
Review of Events to Date........................ II
Summary of Transaction.......................... III
Summary Observations............................ IV
Preliminary Report to the Special Committee..... V
<PAGE>
INTRODUCTION
TRANSACTION [_] During 1997, Gas ("Gas" or the "Company") and Oil ("Oil")
PROPOSAL discussed the idea of a possible business combination by
and between Gas and Oil. The series of proposed
transactions involved in such combination is referred to as
the "Transaction".
A.G. EDWARDS' [_] A.G. Edwards & Sons, Inc. ("A.G. Edwards") has been engaged
ENGAGEMENT by the Special Committee (the "Special Committee") of the
Board of Directors of Gas (the "Board") to act as its
financial advisor with respect to the Transaction and to
issue to the Board an opinion as to the fairness, from a
financial point of view, to the common unitholders of Gas
who are not affiliated with Oil (the "Common Unitholders"),
of the Transaction (the "Fairness Opinion").
[_] The preparation of a fairness opinion is not susceptible to
partial analyses or summary. In rendering its Fairness
Opinion, A.G. Edwards will apply its judgment to a variety
of complex analyses and assumptions. A.G. Edwards may give
various analyses more or less weight than other analyses,
and may deem various assumptions more or less probable than
other assumptions. The assumptions made and the judgments
applied by A.G. Edwards in rendering its opinion are not
readily susceptible to description beyond that set forth in
the written text of the Fairness Opinion itself.
Page 1
<PAGE>
INTRODUCTION
(continued)
AS PART OF ITS [_] A review of the preliminary structure of the Transaction
ENGAGEMENT, (See Tab III -"Summary of Transaction");
A.G. EDWARDS'
ACTIVITIES [_] A review of Gas' and Oil's historical financial statements
INCLUDED, BUT and the financial projections of Gas and Oil (See
WERE NOT Appendices A and B -"Overview of Oil and Gas,"
LIMITED TO, THE respectively);
FOLLOWING:
[_] A review of certain market data of Gas' Common Units and
Oil's Common Stock (See Appendices A and B -"Overview of
Oil and Gas," respectively);
[_] An analysis of the pro forma financial statements of Gas
giving effect to the Transaction (as proposed) (See
Appendix C - "Pro Forma Ownership Analysis");
[_] Conversations with PaineWebber regarding the nature and
extent of development of the terms of the Transaction;
[_] An investigation regarding current operations and future
prospects of Gas and Oil, through interviews with members
of Gas' and Oil's management, respectively (See Appendices
A and B - "Overview of Oil and Gas," respectively);
[_] A review of the industries in which Gas and Oil operate;
[_] A review of the market data for stocks of public companies
in the same or similar lines of business to Gas (See
Appendix I - "Public Company Analysis");
[_] Analyses of the Transaction using various valuation
methodologies; and
[_] Other analyses which it deemed necessary.
Page 2
<PAGE>
INTRODUCTION
(continued)
NATURE OF [_] A.G. Edwards relied upon and assumed, without independent
INFORMATION verification, the accuracy and completeness of all
REVIEWED AND financial and other information publicly available, or
PRESENTED furnished to, or otherwise discussed with A.G. Edwards
including financial statements and financial projections,
as provided by management of Gas and Oil and Oil's
financial advisor. With respect to financial projections
and other information provided to or otherwise discussed
with A.G. Edwards, A.G. Edwards assumed and was advised by
the senior management of Gas and Oil, respectively, that
such projections and other information were reasonably
prepared on a basis that reflects the best currently
available estimates and judgments of the senior management
of Gas and Oil, respectively, as to the expected future
financial performance of Gas and Oil, in each case on a
stand-alone basis and after giving effect to the
Transaction. A.G. Edwards was not engaged to, and did not,
independently verify the information provided and performed
no audit of assets or liabilities and no independent
appraisal of assets or liabilities of either Gas or Oil.
A.G. Edwards has relied upon the assurances of the
management of Gas and Oil that they are not aware of any
facts that would make such information inaccurate or
misleading.
[_] In performing its analyses, A.G. Edwards made numerous
assumptions with respect to the propane distribution
industry and the home heating oil distribution industry,
and general business and economic conditions which are
beyond the control of Gas and Oil. The analyses performed
by A.G. Edwards are not necessarily indicative of actual
values or actual future results, which may be significantly
more or less favorable than suggested by such analyses.
Such analyses were prepared solely as part of A.G. Edwards'
Preliminary Report to the Special Committee.
[_] This presentation is for the private use of the Special
Committee and may not be distributed to any other parties
without A.G. Edwards' written permission.
Page 3
<PAGE>
REVIEW OF EVENTS TO DATE
FEBRUARY 11 [_] A.G. Edwards presents its qualifications to the Special
Committee and its legal counsel.
MARCH 23 [_] Special Committee engaged A.G. Edwards.
MARCH 23 [_] A.G. Edwards met with members of Gas' and Oil's management
and submitted preliminary data request list.
[_] A.G. Edwards began due diligence with management and other
representatives of Gas and Oil.
- Business
- Financial
- Accounting
- Other
MARCH 30 [_] A.G. Edwards received data related to its preliminary data
request list.
MARCH 30 - APRIL [_] A.G. Edwards continued the due diligence process with
27 respect to Gas and Oil.
APRIL 28 [_] Special Committee meeting to discuss the Transaction.
Page 4
<PAGE>
SUMMARY OF TRANSACTION
PRO FORMA GAS UNITS OUTSTANDING
(IN THOUSANDS)
TO SIMPLIFY [_] There are currently 6,355 Gas units outstanding comprised
THE COMPLEXITY of 3,832 common units, 2,396 subordinated units and 127
OF THE STEPS general partner ("GP") units. The subordinated units and GP
IN THE units are assets of Oil.
TRANSACTION,
A.G. EDWARDS
PREPARED A
SUMMARY OF ITS
UNDERSTANDING.
[_] There are currently 26,563 shares of Oil common stock
outstanding, comprised of public shareholders and
"insiders." The public holds 17,160 Class A shares. The
"insiders" hold 9,404 shares which include 6,795 Class A
shares, 11 Class B shares and 2,598 Class C shares.
[_] Each shareholder of Oil will receive a certain number of
units in Gas such that the implied consideration paid for
each Oil share is $3.15.
[_] The publicly held 17,160 Class A shares will receive .1596
shares of newly created Senior Subordinated units (2,738
units in total) with an implied value of $19.74/unit. This
represents an implied purchase price of $3.15/share for an
implied total purchase price of $54.1 million.
[_] The "insiders" of Oil, who hold a total of 9,404 shares
(comprised of A, B and C shares) will also receive
$3.15/share for a total of $29.6 million. The consideration
received by these shareholders will be funded by:
- (1) the distribution of existing units of Gas which are
currently owned by Oil
[_] all of the 127 GP units owned by Oil will be
given as consideration at an implied value of
$21.28/unit, for a total of $2.7 million.
[_] 754 of the 2,396 Subordinated units owned by
Oil will be given as consideration at an
implied value of $16.33/unit, for a total of
$12.3 million.
- (2) the distribution of newly-created units of Gas
[_] to fund the remaining $14.6 million of the
$29.6 million due to the Oil "insiders", Gas
will issue 559 newly-created Senior
Subordinated units and 168 newly-created GP
units. The implied values for these new units
are $19.74 and $21.28, respectively.
Page 5
<PAGE>
Merger Premiums to Market Value Analysis
Mergers with Target Price Equal to or Less than $5 per Share
Announced and Completed 1/1/96-10/9/98
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date Date
Announced Effective Target Name Target Business Description Acquiror Name
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
01/10/96 06/26/96 American Resource Corp Gold mining company REA Gold Corp
01/18/96 08/23/96 AMSERV Healthcare Inc Pvd temp nursing employment Star Multi Care Services Inc
01/23/96 05/09/96 Portage Industries Corp Mnfr extruded plastic sheets Spartech Corp
02/05/96 09/30/96 Customedix Corp Mnfr dental, medical products CUS Acquisitions Inc
02/13/96 07/12/96 Medical Innovations Inc Pvd home health care services Horizon/CMS Healthcare Corp
02/15/96 04/29/96 LDI Corp Computer equip leasing svcs NationsBank Corp, Charlotte, NC
02/28/96 07/11/96 Salton/Maxim Housewares Inc Mnfr electric housewares, fans Windmere Corp
03/13/96 09/27/96 DeSoto Inc Mnfr paints and detergents Keystone Consolidated Inds Inc
04/16/96 05/31/96 CIS Technologies Inc Manufacture computers National Data Corp
04/22/96 06/04/96 Cornerstone Natural Gas Co Natural gas distribution svcs El Paso Field Svcs(El Paso)
05/03/96 03/17/98 Homeowners Group Inc Real estate, insurance agency Cross Country Group Inc
05/06/96 09/03/96 Transcisco Industries Inc Mnfr, service railroad equip Trinity Industries Inc
05/07/96 09/03/96 NMR of America Inc Pvd. medical equip leasing svcs Medical Resources Inc
05/13/96 08/30/96 MDT Corp Mnfr sterility assurance equip Getinge Industries AB
05/15/96 09/10/96 Carlisle Plastics Inc Mnfr, whl plastic prods, resins Tyco International Ltd
06/03/96 01/09/97 Bio-Dental Technologies Corp Provide dental research svcs Zila Inc
06/10/96 07/22/96 SysteMed Inc Pvd medical services Merck-Medco Managed Care Inc
06/11/96 09/03/96 Computer Identics Corp Manufacture bar code scanners Robotic Vision Systems Inc
06/17/96 10/07/96 Scanforms Inc Mnfr business forms Big Flower Press Holdings Inc
06/21/96 08/23/96 Computer Identics Corp Information retrieval svcs United Communications Group
06/24/96 12/05/96 MEM Co Manufacture toiletries Renaissance Cosmetics Inc
07/31/96 11/13/96 Calgene Inc Own and operate greenhouse Monsanto Co
08/13/96 02/27/97 LaTex Resources Inc Oil and gas expln, prodn Alliance Resources PLC
09/10/96 01/03/97 GreenStone Industries Corp Manufacture stationery Louisiana-Pacific Corp
09/11/96 03/04/97 Chempower Inc Insulation, asbestos abatement American Eco Corp
09/16/96 12/06/96 Proler International Corp Whl scrap metals & metals Schnitzer Steel Industries Inc
09/26/96 01/24/97 General Physics Corp Provide training services National Patent Development
10/02/96 12/27/96 Software Publishing Corp Develop software Allegro New Media
10/03/96 11/12/97 Pittencrieff Communications Pvd radiotelephone commun svcs Nextel Communications Inc
10/04/96 12/31/96 Pet Food Warehouse Inc Own, op pet food stores Petco Animal Supplies Inc
10/30/96 12/20/96 Pacific Rehab & Sports Med Own, op rehab hospital Horizon/CMS Healthcare Corp
11/05/96 03/14/97 Panatech Research &
Development Manufacture semiconductors Harbour Group Ltd
11/25/96 02/28/97 American Studios Inc Pvd photography services PCA International Inc
12/06/96 03/18/97 MaxServ Inc (Sears Roebuck) Pvd technical info support svc Sears Roebuck & Co
12/09/96 02/28/97 Houston Biotechnology Inc Mnfr monoclonal antibodies Medarex Inc
01/24/97 07/02/97 INCSTAR Corp (Sorin
Biomedical) Mnfr diagnostic substances American Standard Inc
01/28/97 05/21/97 Calgene Inc (Monsanto Co) Own and operate greenhouse Monsanto Co
01/30/97 08/12/97 AST Research Inc Mnfr computers; dvlp software Samsung electronic Co Ltd
02/07/97 08/01/97 MS Financial (MS Diversified) Pvd financial credit services Search Financial Services Inc
02/11/97 07/31/97 Serv-Tech Inc Maintenance and cleaning svcs Philip Environmental Inc
03/04/97 06/27/97 Audio King Corp Own, op consumer electn stores Ultimate electronic Inc
04/15/97 06/30/97 Kurzweil Applied Intelligence Electronic computing equip Lernout & Hauspic speech
04/30/97 07/25/97 Arden Industrial Products Inc Whl fasteners Park-Ohio Industries Inc
05/01/97 08/01/97 Cryenco Sciences Inc Mnfr liquid gas storage tanks Chart Industries Inc
05/08/97 09/10/97 Imex Medical Systems Inc Mnfr fetal diagnostic instr Nicolet Biomedical Inc
06/16/97 09/30/97 Frederick's of Hollywood, Inc Women's clothing stores Investor Group
06/24/97 07/25/97 Jillians Entertainment Corp Own, op billiard clubs JW Childs Equity Partners LP
07/23/97 12/02/97 Rudy's Restaurant Group Own and operate restaurants Benihana Inc
08/01/97 09/26/97 Community Care of America Inc Own, op nursing homes Integrated Health Services Inc
08/07/97 12/02/97 Magnetic Technologies Corp Manufacture copiers, printers SPS Technologies Inc
08/14/97 12/31/97 Allied Capital Advisers Inc Investment advisory svcs Allied Capital Lending Corp
09/02/97 12/03/97 Ground Round Restaurants Own and operate restaurants GRR Holdings LLC
09/04/97 12/30/97 Cinergi Pictures Entertainment Pvd motion picture prodn svcs Investor Group
09/26/97 09/26/97 Laclede Steel Co Own, operate steel works Birmingham Steel Corp
10/10/97 01/07/98 Puro Water Group Inc Whl bottled water United States Filter Corp
10/13/97 03/19/98 Integrated Brands Inc Produce ice cream Yogen Fuz World-Wide Inc
11/03/97 02/25/98 Individual Inc Pvd on-line info retrieval svc Desktop Data Inc
11/04/97 01/12/98 ComputerVision Corp Mnfr computers, peripherals Parametric Technology Corp
11/12/97 03/03/98 PureTec Corp Manufacture plastic products Tekni-Plex Inc
11/24/97 01/07/98 General Host Corp Own, op specialty retail stores Cypress Group LLC
12/02/97 03/17/98 Staodyn Inc Mnfr electromedical equipment Rehabilicare Inc
12/12/97 02/13/98 Impact Systems Inc Paper prodn control systems Voith Sulzer Paper Technology
12/12/97 09/10/98 Timber Lodge Steakhouse Inc Own, op restaurants Santa Barbara Restaurant Group
12/15/97 02/24/98 MetroGolf Inc Own, op golf courses Family Golf Centers Inc
12/22/97 05/20/98 Artistic Greetings Inc Mnfr personalized stationery MDC Communications Corp
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Value of Enter-
Trans- prise
Date Date Acquiror action Value
Announced Effective Target Name Business Description ($ mil) ($ mil)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
01/10/96 06/26/96 American Resource Corp Gold mining company 77.5 76.353
01/18/96 08/23/96 AMSERV Healthcare Inc Pvd home health care services 9.2 7.895
01/23/96 05/09/96 Portage Industries Corp Manufacture Plastic products 15.8 17,540
02/05/96 09/30/96 Customedix Corp Investment company 3.6 15,103
02/13/96 07/12/96 Medical Innovations Inc Pvd nursing care services 30.3 41,725
02/15/96 04/29/96 LDI Corp Bank bldg co; pvd finl svcs 28.1 288,893
02/28/96 07/11/96 Salton/Maxim Housewares Inc Mnfr personal care appliances 21.1 53,442
03/13/96 09/27/96 DeSoto Inc Manufacture steel wire 36.1 40,529
04/16/96 05/31/96 CIS Technologies Inc Pvd homeowner membership svcs 99.3 112,471
04/22/96 06/04/96 Cornerstone Natural Gas Co Own, op diagnostic imaging ctrs 96.6 97,614
05/03/96 03/17/98 Homeowners Group Inc Pvd homeowner membership svcs 11.4 14,968
05/06/96 09/03/96 Transcisco Industries Inc Mnfr transp equip,parts 44.7 51,126
05/07/96 09/03/96 NMR of America Inc Own,op diagnostic imaging ctrs 40.4 57,369
05/13/96 08/30/96 MDT Corp Mnfr sterilizing equipment 70.3 69.457
05/15/96 09/10/96 Carlisle Plastics Inc Mnfr fire protection systems 122.4 273.282
06/03/96 01/09/97 Bio-Dental Technologies Corp Mnfr,whl pharmaceuticals 40.3 48.477
06/10/96 07/22/96 SysteMed Inc Health insurance company 64.8 60,646
06/11/96 09/03/96 Computer Identics Corp Mnfr 2-D,3-D vision-based sys 42.0 40,881
06/17/96 10/07/96 Scanforms Inc Pvd advertising,marketing svcs 27.5 15,661
06/21/96 08/23/96 Computer Identics Corp Publish newsletters 12.0 11,548
06/24/96 12/05/96 MEM Co Investor group 38.2 29.577
07/31/96 11/13/96 Calgene Inc Mnfr agro chems,manmade fibers 50.0 584,080
08/13/96 02/27/97 LaTex Resources Inc Oilo and gas exploration, prodn 27.1 44,759
09/10/96 01/03/97 GreenStone Industries Corp Mnfr lumber,plywood,pulp 29.2 40,823
09/11/96 03/04/97 Chempower Inc Pvd engineering services 50.0 36,189
09/16/96 12/06/96 Proler International Corp Manufacture steel products 42.5 68,146
09/26/96 01/24/97 General Physics Corp Mnfr contact lenses 261. 70,360
10/02/96 12/27/96 Software Publishing Corp Pvd software services 25.2 8,786
10/03/96 11/12/97 Pittencrieff Communications Pvd cellular telephone svcs 158.4 159,860
10/04/96 12/31/96 Pet Food Warehouse Inc Own and operate pet stores 60.7 55,986
10/30/96 12/20/96 Pacific Rehab & Sports Med Pvd nursing care services 72.7 75,706
11/05/96 03/14/97 Panatech Research &
Development Mnfr steel cutting tools 29.2 26,218
11/25/96 02/28/97 American Studios Inc Pvd photo processing services 66.3 67.650
12/06/96 03/18/97 MaxServ Inc (Sears Roebuck) Mnfr steel Department stores; finl svcs 46.0 87.263
12/09/96 02/28/97 Houston Biotechnology Inc Manufacture pharmaceutiCALS 8.6 8.700
01/24/97 07/02/97 INCSTAR Corp (Sorin
Biomedical) Transportation, building prod 106.3 102.865
01/28/97 05/21/97 Calgene Inc (Monsanto Co) Mnfr agro chems, manmade fibers 242.6 567.548
01/30/97 08/12/97 AST Research Inc Mnfr consumer electronics 495.8 558.108
02/07/97 08/01/97 MS Financial (MS Diversified) Pvd business credit services 17.2 102.602
02/11/97 07/31/97 Serv-Tech Inc Provide waste management svcs 73.4 54.956
03/04/97 06/27/97 Audio King Corp Own, op radio, TV, electn stores 6.0 12.363
04/15/97 06/30/97 Kurzweil Applied Intelligence Mnfr speech tech products 51.3 50.852
04/30/97 07/25/97 Arden Industrial Products Inc Mnfr forged and machined parts 42.0 44.995
05/01/97 08/01/97 Cryenco Sciences Inc Mnfr process control instmnts 19.2 27.904
05/08/97 09/10/97 Imex Medical Systems Inc Investment company 9.3 10.238
06/16/97 09/30/97 Frederick's of Hollywood, Inc Investor group 69.4 57.007
06/24/97 07/25/97 Jillians Entertainment Corp Investment company 4.7 7.007
07/23/97 12/02/97 Rudy's Restaurant Group Own and operate restaurants 18.8 18.936
08/01/97 09/26/97 Community Care of America Inc Pvd specialty healthcare svcs 94.0 89.996
08/07/97 12/02/97 Magnetic Technologies Corp Mnfr industrial fasteners 16.8 15.984
08/14/97 12/31/97 Allied Capital Advisers Inc Closed-end mgmt investment co 49.5 44.111
09/02/97 12/03/97 Ground Round Restaurants Investment company 17.5 56.945
09/04/97 12/30/97 Cinergi Pictures Entertainment Investor group 16.3 59.794
09/26/97 09/26/97 Laclede Steel Co Manufacture steel, steel prod 15.0 131.767
10/10/97 01/07/98 Puro Water Group Inc Mnfr water treatment equip 25.7 30.186
10/13/97 03/19/98 Integrated Brands Inc Produce frozen yogurt 46.8 51.274
11/03/97 02/25/98 Individual Inc Pvd info retrieval svcs 86.8 79.390
11/04/97 01/12/98 ComputerVision Corp Develop, wholesale software 250.3 460.128
11/12/97 03/03/98 PureTec Corp Mnfr plastic 324.6 281.484
11/24/97 01/07/98 General Host Corp Investment bank 326.2 278.128
12/02/97 03/17/98 Staodyn Inc Mnfr electromedical equip 22.5 22.867
12/12/97 02/13/98 Impact Systems Inc Provide paper tech dvlp svcs 28.6 28.467
12/12/97 09/10/98 Timber Lodge Steakhouse Inc Own, op fast food restaurants 30.4 30.925
12/15/97 02/24/98 MetroGolf Inc Own and operate golf courses 6.6 18.428
12/22/97 05/20/98 Artistic Greetings Inc Provide marketing services 33.6 35.618
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Premium
----------------------------------------------------------------------------------
Date Date 1 Day Prior 1 Week Prior 4 Weeks Prior 3 Months Prior 1 Year Prior
Announced Effective Target Name to Annc. Date to Annc. Date to Annc. Date to Annc. Date to Annc. Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
01/10/96 06/26/96 American Resource Corp 30.77 23.50 27.03
01/18/96 08/23/96 AMSERV Healthcare Inc 14.56 27.29 20.59 (4.67) 20.42
01/23/96 05/09/96 Portage Industries Corp 46.67 78.98 78.98 134.67 193.33
02/05/96 09/30/96 Customedix Corp 22.58 26.67 5.56 19.00 (18.98)
02/13/96 07/12/96 Medical Innovations Inc 13.85 18.40 5.71 5.71 37.67
02/15/96 04/29/96 LDI Corp 31.20 21.48 49.09 26.15 5.81
02/28/96 07/11/96 Salton/Maxim Housewares Inc (0.19) 12.84 3.81 1.65 (9.05)
03/13/96 09/27/96 DeSoto Inc 65.41 53.00 80.00 118.57 53.00
04/16/96 05/31/96 CIS Technologies Inc 50.50 30.16 30.16 (5.57) 33.78
04/22/96 06/04/96 Cornerstone Natural Gas Co 28.00 29.73 100.00 134.15 182.35
05/03/96 03/17/98 Homeowners Group Inc 22.07 26.77 93.88 135.43 17.71
05/06/96 09/03/96 Transcisco Industries Inc 15.56 36.84 28.40 57.58 271.43
05/07/96 09/03/96 NMR of America Inc 41.43 86.79 90.39 98.08 37.56
05/13/96 08/30/96 MDT Corp 12.82 22.22 4.76 15.79 (6.38)
05/15/96 09/10/96 Carlisle Plastics Inc 38.20 38.20 41.83 73.94 31.51
06/03/96 01/09/97 Bio-Dental Technologies Corp 64.99 43.28 109.42 194.49 65.09
06/10/96 07/22/96 SysteMed Inc (4.00) 4.35 9.09 (23.81) (56.36)
06/11/96 09/03/96 Computer Identics Corp 63.11 54.53 54.53 72.71 19.84
06/17/96 10/07/96 Scanforms Inc 61.40 61.40 58.62 70.37 130.00
06/21/96 08/23/96 Computer Identics Corp 28.33 46.67 71.11 105.33 208.00
06/24/96 12/05/96 MEM Co 13.21 81.82 90.48 93.55 114.29
07/31/96 11/13/96 Calgene Inc 64.10 80.28 39.13 31.96 14.29
08/13/96 02/27/97 LaTex Resources Inc 181.14 202.77 181.14 228.00 107.16
09/10/96 01/03/97 GreenStone Industries Corp 33.33 52.73 58.49 42.37 50.00
09/11/96 03/04/97 Chempower Inc 48.06 48.06 45.88 50.30 65.33
09/16/96 12/06/96 Proler International Corp 132.26 125.00 148.28 33.33 9.09
09/26/96 01/24/97 General Physics Corp 16.57 31.61 36.00 23.64 45.71
10/02/96 12/27/96 Software Publishing Corp 14.86 10.90 60.80 (88.09)
10/03/96 11/12/97 Pittencrieff Communications 8.95 14.40 30.74 (13.08) 29.14
10/04/96 12/31/96 Pet Food Warehouse Inc 22.93 26.00 48.24 48.24 57.50
10/30/96 12/20/96 Pacific Rehab & Sports Med 67.74 62.50 48.57 60.00 6.12
11/05/96 03/14/97 Panatech Research &
Development 55.56 55.56 51.35
11/25/96 02/28/97 American Studios Inc 90.48 110.53 166.67 (65.28) (73.33)
12/06/96 03/18/97 MaxServ Inc (Sears Roebuck) 19.23 67.57 55.00 67.57 129.63
12/09/96 02/28/97 Houston Biotechnology Inc 52.00 62.13 52.00 (93.01) (92.05)
01/24/97 07/02/97 INCSTAR Corp (Sorin
Biomedical) 42.93 53.21 68.53
01/28/97 05/21/97 Calgene Inc (Monsanto Co) 62.03 60.00 60.00 60.00 42.22
01/30/97 08/12/97 AST Research Inc 16.76 8.00 20.00 23.43 (31.43)
02/07/97 08/01/97 MS Financial (MS Diversified) 20.00 46.67 10.00 1.54 (70.67)
02/11/97 07/31/97 Serv-Tech Inc 32.00 60.00 88.57 129.57 12.34
03/04/97 06/27/97 Audio King Corp 60.00 68.00 68.00 68.00 (18.05)
04/15/97 06/30/97 Kurzweil Applied Intelligence 83.83 69.69 66.49 84.00 63.56
04/30/97 07/25/97 Arden Industrial Products Inc 41.18 50.00 37.14 20.00 26.32
05/01/97 08/01/97 Cryenco Sciences Inc 69.23 76.00 72.55 41.94 (26.67)
05/08/97 09/10/97 Imex Medical Systems Inc 7.90 2.76 2.76 (30.32) (32.50)
06/16/97 09/30/97 Frederick's of Hollywood, Inc 48.85 44.47 25.95 93.75 85.07
06/24/97 07/25/97 Jillians Entertainment Corp 14.29 77.78 45.46 220.00 166.67
07/23/97 12/02/97 Rudy's Restaurant Group 50.94 70.21 72.04 60.00 5.26
08/01/97 09/26/97 Community Care of America Inc 23.08 18.52 88.24 68.42 (48.39)
08/07/97 12/02/97 Magnetic Technologies Corp 25.00 25.00 33.33 42.86 33.33
08/14/97 12/31/97 Allied Capital Advisers Inc 10.41 4.68 10.41 8.97 (28.00)
09/02/97 12/03/97 Ground Round Restaurants 10.00 10.00 (5.71) 14.78 (34.00)
09/04/97 12/30/97 Cinergi Pictures Entertainment 26.90 24.75 56.60 236.00 26.00
09/26/97 09/26/97 Laclede Steel Co 106.45 106.45 106.45 113.33 88.24
10/10/97 01/07/98 Puro Water Group Inc 33.95 47.69 44.00 44.00
10/13/97 03/19/98 Integrated Brands Inc 69.94 106.35 167.50 501.33 381.07
11/03/97 02/25/98 Individual Inc 0.92 14.93 (7.02) 47.71 (6.00)
11/04/97 01/12/98 ComputerVision Corp 28.31 69.92 18.63 14.33 (55.09)
11/12/97 03/03/98 PureTec Corp 28.74 34.94 31.77 143.48 69.70
11/24/97 01/07/98 General Host Corp 60.00 62.96 79.59 51.72 77.69
12/02/97 03/17/98 Staodyn Inc 47.38 47.38 89.49 100.45 152.95
12/12/97 02/13/98 Impact Systems Inc 57.14 49.15 44.26 69.23 109.52
12/12/97 09/10/98 Timber Lodge Steakhouse Inc 74.13 74.13 81.19 94.32 139.43
12/15/97 02/24/98 MetroGolf Inc 20.00 20.00 (11.11) (25.00) (75.51)
12/22/97 05/20/98 Artistic Greetings Inc 28.45 47.10 52.00 47.10 21.60
</TABLE>
Page F-10
<PAGE>
SUMMARY OF GAS UNITS OUTSTANDING
PRE-FINANCING ASSUMPTIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Distributed to Oil Issued to Oil
-------------------- --------------------
Type of Units Current Public Insiders Public Insiders Retired Pro Forma
- -------------- ------- ------ -------- ------ -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Common 3,832 - - - - - 3,832
Senior Subordinated - - - 2,738 559 - 3,297
Subordinated 2,396 - 754 - - 1,642 754
General Partner (a) 127 - 127 - 168 - 295
-------- ---------
6,355 8,178
</TABLE>
___________________________________
(a) The number of GP units issued reflect the assumption of a 6,587 common unit
equity offering to refinance certain of the assumed Oil debt. Hence, the
number of GP units reflected in the pro forma column do not equal 2% of the
pro forma outstanding units shown above but do equal exactly 2% of the pro
forma units outstanding on a post financing basis.
Page 7
<PAGE>
EQUITY PURCHASE PRICE CALCULATION
IMPLIED EQUITY VALUE OF OIL'S ASSETS
(units in thousands, $ in millions, except per unit amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Purchase Price of Oil's Equity Purchase Price of Oil's Equity
------------------------------ --------------------------------------------------------
Value of Securities Equity Value of Oil's Value of Oil's GP and
Event Paid to Oil Shareholders Heating Oil Assets Subordinated Units in Star
- ------------------ ------------------------------ ------------------------ --------------------------
<S> <C> <C> <C>
Issuance of Senior Subordinated
Units to Public Oil Shareholders 2,738 x $19.74
------------------------------
$54.1 $54.1 -
Distribution of General Partner
Unit to Inside Oil Shareholders 127 x $21.28
------------------------------
$2.7 - $2.7
Distribution of Subordinated
Units to Inside Oil Shareholders 754 x $16.33
------------------------------
$12.3 - $12.3
Issuance of General Partner
Units to Inside Oil Shareholders 168 x $21.28 $3.6 -
------------------------------
$3.6
Issuance of Senior Subordinated
Units to Inside Oil Shareholders 559 x $19.74
------------------------------
$11.0 $11.0 -
Retire Subordinated Units 1,642 x $16.33
---------------------
($26.8) $26.8
$41.8 $41.8
----------- ------------------------------------
Total $83.7 $83.7
</TABLE>
Divided by 26.563 shares of Oil's Common stock = $3.15 per share
Page 8
<PAGE>
SUMMARY OBSERVATIONS
COMPARATIVE STOCK
PRICE PERFORMANCE [_] A.G. Edwards has compared the historical prices of Gas'
and Oil's common unit/stock to an index of selected
companies. (See Appendix E - "Exchange Ratio Analysis.")
[_] While Gas' unit price has remained relatively flat over
the last two years, in line with the comparable index,
Oil's stock price has declined significantly over this
period.
<TABLE>
<CAPTION>
COMPARATIVE STOCK PRICE PERFORMANCE
----------------------------------------------------------------------------
Premium of Current Price to Price
-----------------------------------------------------------------------------
Current 2 Years 1 Year 180 Days 60 Days 30 Days
Price (b) Prior Prior Prior Prior Prior
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gas 21.94 5.1% 1.4% -2.0% -6.2% -0.3%
Oil 1.63 -76.8% -45.8% -48.1% -35.0% -0.9%
Composite (a) 21.96 -2.2% 6.4% -5.4% -4.4% 1.3%
</TABLE>
(a) Composite index includes the following companies: APU,
CNO, HPG, EGP, NPL, SPH.
(b) As of 4/22/98
[Gas Graph appears here] [Oil Graph appears here]
Page 9
<PAGE>
SUMMARY OBSERVATIONS
(continued)
PREMIUM PAID ANALYSIS [_] A.G. Edwards calculated the implied equity
purchase price of Oil and compared the premium to
Oil's current and historical prices. These
premiums were compared to premiums paid in "Merger
of Equals" transactions. (See Appendix D -"Premium
Paid Analysis.")
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
Mergers of Equals
-------------------------
Oil Median Adj. Mean(a)
--- ------ -------------
<S> <C> <C> <C>
Premium to stock price one day prior 93.8% 9.3% 10.1%
Premium to stock price one week prior 97.6% 10.0% 8.0%
Premium to stock price one month prior 101.6% 6.5% 6.5%
</TABLE>
______________________
(a) Adjusted mean excludes highest and lowest data
points.
Page 10
<PAGE>
SUMMARY OBSERVATIONS
(continued)
EXCHANGE RATIO ANALYSIS [_] A.G. Edwards reviewed the historical prices
of Gas' and Oil's common unit/stock and the
implied exchange ratio and compared them to
the proposed Exchange Ratio of 6.96x, which
represents the proposed Oil price of
$3.15/share and Gas price of $21.94/unit.
(See Appendix E - "Exchange Ratio Analysis.")
[_] Due to the price decline of Oil's common
stock over the past year, the current
exchange ratio, based upon the current
unit/share prices of Gas and Oil ($21.938
and $1.625, respectively, as of April 22,
1998), represents a premium of 93.8% to the
current market price of Oil.
[_] Relative to current prices, the exchange
ratio at $3.15 is low, however, it is in
line with the average prices of the
companies' equity over the past two years.
[GRAPH APPEARS HERE]
Page 11
<PAGE>
SUMMARY OBSERVATIONS
(continued)
TRANSACTION MULTIPLE ANALYSIS [_] A.G. Edwards calculated the implied
transaction multiple paid for Oil on a
firm valuation basis, including costs
and certain adjustments associated with
the Transaction, and arrived at the
following multiples:
EBITDA Multiple
------ --------
1997 Adjusted 9.1x
Adjusted 1998 Budget 10.2x
1999 Projected 7.6x
(See Appendix F - "Transaction Multiple
Analysis.")
[_] A.G. Edwards calculated the implied
transaction multiple paid for Oil's
existing heating oil business, excluding
the valuation attributable to
consolidation opportunities, and arrived
at the following multiples:
EBITDA Multiple
------ --------
1997 Adjusted 6.1x
Adjusted 1998 Budget 6.9x
1999 Projected 5.1x
(See Appendix F - "Transaction Multiple
Analysis.")
[_] Oil has historically paid EBITDA
multiples averaging 4.5x, with a range
of 2.7x to 6.5x, for its acquisitions.
[_] Gas has historically paid EBITDA
multiples averaging 7.0x, with a range
of 5.1x to 7.3x, for its acquisitions.
Page 12
<PAGE>
SUMMARY OBSERVATIONS
(continued)
RELATIVE CONTRIBUTION ANALYSIS [_] A.G. Edwards reviewed and compared the
relative contribution of Gas and Oil
to the pro forma combined equity based
upon 1996, 1997, 1998E and 1999E
EBITDA. (See Appendix G - "Relative
Contribution Analysis") Other measures
of relative contribution analysis were
non-meaningful.
[_] For Gas' contribution of approximately
34% of the combined entity's EBITDA(a),
it will receive approximately 37% of
the implied firm value.
[GRAPHS APPEAR HERE]
_____________________________________________
(a) For purposes of its analysis, A.G.
Edwards converted Oil's historical
December 31st fiscal year-end to a
September 30th fiscal year-end for
comparison purposes. Oil's projections
are based on a December 31st calendar
year end. Other measures of relative
contribution analysis are non-
meaningful.
(b) Includes only heating oil EBITDA for
Oil.
(c) Firm value for all of Oil.
(d) Implied firm value of only Oil's heating
oil assets.
Page 13
<PAGE>
Summary Observations
(continued)
Accretion/Dilution Analysis
[_] A.G. Edwards reviewed the distributable cash
flow per unit and the related accretion, common
unit coverage and total unit coverage on a pro
forma basis (See Appendix H -
"Accretion/Dilution Analysis").
[_] For the purpose of this analysis, A.G. Edwards
had PaineWebber run its pro forma financial
model for six scenarios to determine the
sensitivity of certain assumptions.
<TABLE>
<CAPTION>
Base Case
-----------------------------
4.1% Attrition
Gas $0.01 Margin growth
Stand-alone $30.0mm at 4.75x Acquisitions
----------- -----------------------------
<S> <C> <C>
DCF per unit
1998E (a) $1.270 $1.570
1998N (b) 1.930 2.190
1999P 2.250 3.200
Accretion/Dilution
1998E (a) 23.6%
1998N (b) 13.5%
1999P 42.2%
Common unit coverage
1998E (a) 0.94x 0.99x
1998N (b) 1.42 1.38
1999P 1.66 1.93
Total unit coverage
1998E (a) 0.58x 0.71x
1998N (b) 0.88 0.99
1999P 1.02 1.39
</TABLE>
<TABLE>
<CAPTION>
Sensitivity Cases
-----------------------------------------------------
Attrition Margin Growth Acquisitions
--------------- ---------------- -------------
6.00% 2.00% $0.000 $0.015 $50mm at 5.75
----- ----- ------ ------ -------------
<S> <C> <C> <C> <C> <C>
DCF per unit
1998E (a) $1.570 $1.570 $1.570 $1.570 $1.570
1998N (b) 2.190 2.190 2.190 2.190 2.190
1999P 3.080 3.330 2.910 3.350 3.480
Aceration/Dilution
1998E (a) 23.6% 23.6% 23.6% 23.6% 23.6%
1998N (b) 13.5% 13.5% 13.5% 13.5% 13.5%
1999P 36.9% 48.0% 29.3% 48.9% 54.7%
Common Unit Coverage
1998E (a) 0.99x 0.99x 0.99x 0.99x 0.99x
1998N (b) 1.38 1.38 1.38 1.38 1.38
1999P 1.86 2.01 1.76 2.02 2.10
Total Unit Coverage
1998E (a) 0.71x 0.71x 0.71x 0.71x 0.71x
1998N (b) 0.99 0.99 0.99 0.99 0.99
1999P 1.34 1.45 1.26 1.45 1.51
</TABLE>
<TABLE>
<CAPTION>
High Case
----------------------------
4.1% Attrition
$0.015 Margin growth
$50mm at 5.75x Acquisitions
<S> <C>
DCT per unit
1998E (a) $1.570
1998N (b) 2.190
1999P 3.640
Accretion/Dilution
1998E (a) 23.6%
1998N (b) 13.5%
1999P 61.8%
Common unit coverage
1998E (a) 0.99x
1998N (b) 1.38
1999P 2.20
Total unit coverage
1998E (a) 0.71x
1998N (b) 0.99
1999P 1.58
</TABLE>
__________________
(a) 1998 estimate assumes no acquisitions for either
company, and is adjusted to reflect actual results
through 3/31/98 .
(b) 1998 budgeted.
Page 14
<PAGE>
Summary Observations
(continued)
Public Company Analysis
[_] A.G. Edwards compared certain financial and market information of Gas on
both a stand-alone and pro forma basis to that of certain public master
limited partnerships (See Appendix I -- Public Company Analysis").
Public Comparable Companies (a)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Public Public
Pro forma Company Company
Gas Gas Medians Ranges
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Yield 10.0% 10.5% 9.6% 8.5% to 10.6%
Firm value/LTM EBITDA 12.7x (b) 10.8x (b) 12.5x 9.8x to 16.7x
Firm value/1998 normalized EBITDA 8.7x (c) 7.9x (c) 11.5x 10.3x to 13.7x
Equity Market Cap/LTM DCF 18.0x (d) 14.0x (d) 15.7x 9.4x to 25.5x
Equity Market Cap/1998 normalized DCF 9.7x (e) 7.5x (e) 13.9x 11.6x to 16.9x
LTM common unit coverage 0.9x (f) 1.0x (f) 1.4x 0.6x to 1.5x
1998E common unit coverage 1.7x (g) 1.8x (g) 1.4x 0.9x to 1.9x
LTM total unit coverage 0.6x (h) 0.7x (h) 0.7x 0.4x to 1.0x
1998E total unit coverage 1.0x (i) 1.3x (i) 0.7x 0.7x to 1.0x
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Public comparable companies include: APU, CNO, FGP, HPG, CNL and SPH
(b) Firm value/adjusted 1998 budget EBITDA.
(c) Firm value/1999 estimated EBITDA.
(d) Equity market cup/adjusted 1998 budget EBITDA.
(e) Equity market cap/1999 estimated DCF.
(f) Adjusted 1998 budget.
(g) 1999 estimates.
(h) Adjusted 1998 budget.
(i) 1999 estimates.
Page 15
<PAGE>
Summary Observations
(continued)
DISCOUNTED CASH
FLOW ANALYSIS [_] A.G. Edwards calculated the implied present value of
estimated unlevered free cash flows for Gas on both a
stand-alone and pro forma basis (See Appendix J --
"Discounted Cash Flow Analysis").
[_] Key assumptions used in the analysis were:
- Oil maintaining a flat 4.1% attrition rate;
relatively no margin improvement; and completing
$30 million in acquisitions each year at a 4.75x
EBITDA multiple.
- A 7.9% weighted average cost of capital for both
cases. (See Appendix B, page 24 and Appendix K,
page 57).
- A 10.2x terminal EBITDA multiple, representing the
current year normalized EBITDA.
<TABLE>
<CAPTION>
DISCOUNTED CASH FLOW
--------------------------------------------------------------------------------------------
Net Present Original Equity value
Present Current Value Common units/ to Original
($ in thousands) Value Net Debt (a) of Equity Total units (b) Common Units (c)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Pro Forma $970,827 ($297,334) $673,493 26.0% $174,793
Gas Stand-alone $329,620 ($102,956) $226,664 60.3% $136,669
----------
Increase in value to original common unit holders: $ 38,124
==========
</TABLE>
____________________________________________________
(a) Represent total projected debt less cash as of 9/30/98.
(b) Total units include common, subordinated and GP units.
(c) Current market value of common units is $84,065.
Page 16
<PAGE>
SUMMARY OBSERVATIONS
(continued)
POTENTIAL
QUALITATIVE
ADVANTAGES AND
DISADVANTAGES TO
GAS UNITHOLDERS
<TABLE>
<CAPTION>
Advantages Disadvantages
---------- -------------
<S> <C>
. Geographic diversification . Market perception of heating oil
. Product diversification . Impact of attrition on growth
. Critical mass . MQD reserves & coverage
-acquisition programs
-economies of scale . Institutional ownership
-investor profile
-cross marketing . Potential for NYSE listing
. Market liquidity
</TABLE>
Page 17
<PAGE>
PRELIMINARY REPORT TO GAS' SPECIAL COMMITTEE
[_] A.G. Edwards has initiated a full diligence review of
Oil and has updated its earlier reviews of Gas,
including: visits to corporate headquarters; meetings
with senior operations and financial officers; review
of financial statements, projections, documents and
information; evaluation and revision of alternative
modeling of the Transaction with Oil's financial
advisor; visit to Long Island calling center and
meeting with Oil's former consultant and now Vice
President; meeting with A.G. Edwards' equity research
analyst covering MLP's; and other relevant inquiries
regarding operations, acquisitions, financings and
other matters.
[_] A.G. Edwards preliminary diligence and work has
resulted in certain tentative conclusions and
observations regarding Oil and Gas which differ from
its original expectations and perceptions, including:
- the anemic heating season in first quarter of
calendar 1998 had a greater adverse impact on Gas
than on Oil;
- Oil has made strides to implement key portions of
Oil's plan and the McKinsey report, including
corporate identification, customer communications
and implementation of a service culture,
regionalization, cross marketing arrangements and
rationalization of the management team;
- although the El Nino affect distorted the first
quarter of 1998, Oil's attrition was moderated and
its pricing strategy was enhanced; and
- Gas has demonstrated an ability to make propane
acquisitions on a tuck-in and market expansion
basis, and has already agreed to acquire a heating
oil business.
Page 18
<PAGE>
PRELIMINARY REPORT TO GAS' SPECIAL COMMITTEE
(continued)
[_] Although A.G. Edwards does not presently have an
adequate basis to form any opinion regarding the
Transaction, A.G. Edwards does recommend that the
Special Committee and its advisors proceed with its
careful consideration and evaluation of the proposed
Transaction.
[_] A.G. Edwards requests that Joel Swanson, Esq. and Baker
& Botts, LLP consult with Oil's attorneys regarding the
proposed resolution of the myriad of legal issues
involving tax, partnership and corporate compliance and
the timing of the documentation of the Transaction in
terms of definitive agreements, proxy statements and
the like.
[_] A.G. Edwards perceives Gas as taking appropriate steps
to assure procedural fairness of the Transaction
including the appointment of the Special Committee, the
engagement of counsel and financial advisor and the
approval of the Transaction by the majority of
Unitholders. The Special Committee should consider
whether Oil should be obligated to take parallel action
to assure procedural fairness.
Page 19
<PAGE>
PRELIMINARY REPORT TO GAS' SPECIAL COMMITTEE
(continued)
[_] A.G. Edwards suggests that the Special Committee's
consideration of substantive fairness to the Common
Unitholders should include an evaluation by the Special
Committee and its advisors of:
- whether Gas' partnership agreement should be amended
to raise the future required minimum quarterly
distribution ("MQD") for common unitholders and, if
so, by how much and for what period(s);
- whether the $3.15 exchange ratio should be lowered
and, if so, by how much;
- whether the definitive agreements should be drafted
consistent with the PaineWebber models so that any
excess funds expended by Oil for debt refinancings
and the Transaction fees in general should
automatically reduce the aggregate consideration
paid by Gas for the acquisition of Oil by an equal
amount;
- whether cash balances should be set aside for (a)
the funding of any unearned MQD to be paid to the
new unitholders, (b) the funding of Gas' surplus
balance to account for the addition of new
outstanding units, and (c) the funding of any off-
balance sheet liabilities, such as pension or tax;
- whether cash payments should be required for the
issuance of new general partner interests and, if
so, by how much; and
- such other issues suggested by the members of the
Special Committee and its counsel.
[_] A.G. Edwards recommends that the Special Committee
communicate suggested revisions of the Transaction to
management of Oil for their consideration.
Page 20
<PAGE>
Appendices to
PRELIMINARY REPORT TO
THE SPECIAL COMMITTEE OF GAS
A.G. EDWARDS & SONS, INC.
INVESTMENT BANKING
April 28, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Appendices
----------
<S> <C>
Overview of Oil...................................... A
Overview of Gas...................................... B
Pro Forma Ownership Analysis......................... C
Premium Paid Analysis................................ D
Exchange Ratio Analysis.............................. E
Transaction Multiple Analysis........................ F
Relative Contribution Analysis....................... G
Accretion/Dilution Analysis.......................... H
Public Company Analysis.............................. I
Discounted Cash Flow Analysis........................ J
Capital Structure Analysis........................... K
PaineWebber Models as of 4/24/98..................... L
</TABLE>
<PAGE>
OVERVIEW OF OIL
[_] Oil is the largest retail distributor of home heating oil in the United
States, serving approximately 350,000 customers in the Northeast and Mid-
Atlantic states, including the metropolitan areas of Baltimore, Boston, New
York City and Washington, D.C.
[_] Since 1979 Oil has been the principal consolidator in the industry, having
acquired 188 retail heating oil distributors. As a result of these
acquisitions, heating oil volume sold has increased from 59.4 million
gallons in 1980 to 410.3 million gallons in 1997.
[_] Despite Oil's size, its customer base represents only approximately 5% of
the residential home heating oil customers in the Northeast, uniquely
positioning the company to continue its strategy of growth through
acquisitions.
[_] Oil's strongest competitive advantage is clearly its size, particularly in
relation to its competitors. Oil's size provides it significant
opportunities not afforded to most of the industry's small, local, family-
owned businesses. These opportunities include attracting and retaining a
professional management team, accessing and maintaining the latest
developments in computer and communications technology, and achieving
significant operating and marketing efficiencies.
[_] Oil's primary goals currently include: reducing operating costs and
increasing profitability; reducing customer attrition through a focus on
attracting new customers (better structured, upgraded sales force, brand
image, cross marketing agreements) and retaining existing customers
(improving service and having all employees function as salespeople); and,
given the financial wherewithal, exploit its ability to further consolidate
the home heating oil market.
Page 1
<PAGE>
Overview of Oil
Summary Financial Analysis
($ in thousands, except per share data)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
State of Incorporation: Minnesota Market Price (4/22/98): $1.625
Headquarters: Stamford, CT 52-Week High - Low: $3.875 - 1.438
Auditors: KPMG Peat Marwick LLP Shares Outstanding: 26,563 (a)
Primary Exchange: NASDAQ Most Recent Fiscal Year End: 12/31/97
Primary Area of Focus: Northeast and Mid-Atlantic U.S.
Selected Data
- --------------------------------------------------------------------------------------------------------------------
Total Net Loss Loss Distributable DCF Acquisition
Year Revenues EBITDA (c) to Common per Share Cash Flow (d) per Share CapEx.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1994 $ 546,677 $ 55,387 ($7,776) ($0.36) $ 28,020 $ 1.29 $ 26,411
1995 609,507 56,753 (26,742) (1.06) 14,461 0.57 26,438
1996 608,161 42,070 (30,704) (1.20) 6,158 0.24 28,493
1997 548,141 36,010 (27,543) (1.06) 842 0.03 16,252
Proj- 1998 (e) 38,500
Proj- 1999 (e) 51,657
<CAPTION>
- --------------------------------------------------------------------------
BOOK CAPITALIZATION
- --------------------
<S> <C>
(12/31/97)
-----------
Total Debt (b) $ 331,004
Total Stockholders' Equity (177,033)
-----------
TOTAL $ 153,971
===========
ESTIMATED FIRM VALUE
- --------------------
Market Value of Total Debt (b) $ 314,473
Market Value of Common (f) 43,347
-----------
TOTAL $ 357,819
===========
Less: Cash and Equivalents (g) 11,740
NET FIRM VALUE $ 346,079
===========
MULTIPLE ANALYSIS
- -----------------
CURRENT
Net Firm Value/ 97A EBITDA: 9.6X
Net Firm Value/ 98E EBITDA: 9.0
Net Firm Value/ 99E EBITDA: 6.7
PROPOSED $3.15 PRICE
Net Firm Value/ 97A EBITDA: 11.1X
Net Firm Value/ 98E EBITDA: 10.3
Net Firm Value/ 99E EBITDA: 7.7
- --------------------------------------------------------------------------
</TABLE>
- ------------------------------------------
(a) Includes Class A, B and C shares.
(b) Includes debt and redeemable and exchangeable preferred stock.
(c) EBITDA is defined as gross profit less SG&A expenses and direct delivery
expense.
(d) Represents EBITDA less interest expense, maintenance capital expenditures,
and cash taxes.
(e) Source: management's projections; 1998 EBITDA is before acquisitions,
adjusted for actual 1Q results. See pages 9 to 13.
(f) Calculated based on (Class A + Class C* market price) + [(Class B*
($17.50+$0.2763)]
(g) Includes balance in the cash collateral account which is required by the
company's credit agreement.
Page 2
<PAGE>
OVERVIEW OF OIL
SELECTED FINANCIAL DATA
($ IN THOUSANDS)
<TABLE>
<CAPTION>
====================================================================================================================
HISTORICAL YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------
1993 % 1994(a) % 1995(a) % 1996 %
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $538,526 100.0% $546,677 100.0% $609,507 100.0% $608,161 100.0%
% Growth 1.5% 11.5% -0.2%
Cost of sales 366,810 68.1% $362,981 66.4% 387,825 63.6% 427,388 03.3
--------------- --------------- -------------- ---------------
Gross profit 171,717 31.9% 183,696 33.6% 221,682 36.4% 180,773 29.7%
SG&A expenses 93,379 17.3% 95,314 17.4% 128,295 21.0% 105,601 17.4%
Direct delivery expense 29,902 5.6% 32,995 6.0% 36,634 6.0% 33,102 5.4%
Restructuring charges - - - 1,150 0.2%
Corporate identity expenses - - - 2,659 0.4%
Pension curtailment expense - - - 557 0.1%
Amortization of customer lists 23,183 4.3% 19,748 3.6% 20,527 3.4% 18,611 3.1%
Depreciation of plant and equipment 5,933 1.1% 6,469 1.2% 12,374 2.0% 6,574 1.1%
Amortization of deferred charges 5,548 1.0% 6,177 1.1% 6,142 1.0% 4,760 0.8%
Provision for supplemental benefits 264 0.0% 373 0.1% 1,407 0.2% 873 0.1%
--------------- -------------- -------------- ---------------
Operating income (loss) 13,509 2.5% 22,619 4.1% 16,303 2.7% 6,886 1.1%
Interest expense, net (20,508) -3.8% (23,766) -4.3% (38,792) -6.4% (32,412) -5.3%
Other income (expense) (165) 0.0% 109 0.0% 218 0.0% 1,842 0.3%
--------------- --------------- --------------- ----------------
Loss before income taxes, equity
interest and extraordinary item (7,164) -1.3% (1,038) -0.2% (22,271) -3.7% (23,684) -3.9%
Income taxes 400 0.1% 600 0.1% 500 0.1% 500 0.1%
--------------- --------------- --------------- ----------------
Loss before equity interest and
extraordinary item (7,564) -1.4% (1,638) -0.3% (22,771) -3.7% (24,184) -4.0%
Share of income (loss) of Gas - 0.0% (1,973) -0.4% 728 0.1% 2,283 0.4%
--------------- --------------- --------------- ----------------
Extraordinary item-loss on early
extinguishment of debt (867) -0.2% (655) -0.1% (1,436) -0.2% (6,414) -1.1%
--------------- -------------- --------------- ----------------
Net loss (8,431) -1.6% (4,266) -0.8% (23,479) -3.9% (28,315) -4.7%
Preferred stock dividends (3,367) -0.6% (3,510) -0.6% (3,263) -0.5% (2,389) -0.4%
--------------- --------------- --------------- ----------------
Net loss to common ($11,798) -2.2% ($7,776) -1.4% ($26,742) -4.4% ($30,704) -5.0%
======== ===== ======== ==== ======== ==== ======== ====
Net loss per share ($0.55) ($0.36) ($1.06) ($1.20)
======== ======== ======== ========
Weighted average shares
outstanding(b) 21,538 21,745 25,309 25,581
EBITDA(c) $48,437 9.0% $55,387 10.1% $56,753 9.3% $42,070 6.9%
Adjusted net loss to common (10,931) -2.0%(d) (7,121) -1.3%(e) (25,306) -4.2%(f) (22,583) -3.7%(g)
Adjusted net loss per share ($0.51) ($0.33) ($1.00) ($0.88)
======== ======== ======== ========
Acquisition capital expenditures $15,399 $26,411 $26,438 $28,493
Maintenance capital expenditures(i) 3,000 3,000 3,000 3,000
EBITDA/total assets 18.9% 13.9% 15.9% 15.3%
Distributable cash flow 24,528 28,020 14,461 6,158
<CAPTION>
1997 %
---------------
<S> <C> <C>
Net sales $548,141 100.0%
% Growth -9.9%
Cost of sales 379,748 69.3%
---------------
Gross profit 168,393 30.7%
SG&A expenses 102,377 18.7%
Direct delivery expense 30,006 5.5%
Restructuring charges 2,850 0.5%
Corporate identity expenses 4,136 0.8%
Pension curtailment expense 654 0.1%
Amortization of customer lists 17,903 3.3%
Depreciation of plant and equipment 7,204 1.3%
Amortization of deferred charges 4,639 0.8%
Provision for supplemental benefits 565 0.1%
---------------
Operating income (loss) (1,941) 4.0%
Interest expense, net (31,668) -5.8%
Other income (expense) 11,445 2.1%
---------------
Loss before income taxes, equity
interest and extraordinary item (22,164) -4.0%
Income taxes 500 0.1%
---------------
Loss before equity interest and
extraordinary item (22,664) -4.1%
Share of income (loss) of Gas (235) 0.0%
---------------
Extraordinary item-loss on early
extinguishment of debt -
---------------
Net loss (22,899) -4.2%
Preferred stock dividends (4,644) -0.8%
--------------
Net loss to common ($27,543) -5.0%
======== ====
Net loss per share ($1.06)
========
Weighted average shares
outstanding(b) 26,039
EBITDA(c) $36,010 6.6%
Adjusted net loss to common (35,439) -6.5%(b)
Adjusted net loss per share ($1.36)
========
Acquisition capital expenditures $16,252
Maintenance capital expenditures(i) 3,000
EBITDA/total assets 14.5%
Distributable cash flow 842
</TABLE>
__________________________________________________
(a) Gas operations consolidated into OIL.
(b) Weighted shares do not include Class B shares.
(c) Calculated as gross profit minus SG&A expense and direct delivery expense.
(d) Excludes $867 for early extinguishment of debt.
(e) Excludes $655 for early extinguishment of debt.
(f) Excludes $1,436 for early extinguishment of debt.
(g) Excludes $6,414 for early extinguishment of debt.
(h) Excludes $11,400 gals on sale of TLC.
(i) Management's estimates.
Page 3
<PAGE>
OVERVIEW OF OIL
MARKET PRICE ANALYSIS
PRICE AND VOLUME
12/15/95 - 4/22/98
[GRAPH APPEARS HERE]
Page 4
<PAGE>
OVERVIEW OF OIL
CLASS A COMMON STOCK TRADING HISTORY - VOLUME DISTRIBUTION
1995 - 1998 (a)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 (a)
-------------------- ------------------- ------------------ --------------------
Price Per Share Volume % Volume % Volume % Volume %
---------------------- -------------------- ------------------- ------------------ --------------------
<S> <C> <C> <C> <C> <C>
Greater Than $9,400
9.200 9,400 600 100.00%
9.000 9,200 0 99.99%
8.800 9,000 49,200 99.99%
8.600 8,800 6,800 99.41%
8.400 8,600 67,500 99.33%
8.200 8,400 289,100 98.54%
8.000 8,200 161,500 95.13% 1,600 100.00%
7.800 8,000 873,500 93.22% 47,400 99.96%
7.600 7,800 245,800 82.92% 236,200 98.87%
7.400 7,600 193,300 80.02% 185,000 93.44%
7.200 7,400 1,154,800 77.74% 822,300 89.19%
7.000 7,200 5,190,500 64.12% 1,507,100 70.28%
6.800 7,000 246,000 2.90% 815,300 35.63%
6.600 6.800 498,500 16.88%
6.400 6.600 129,300 5.42% 417,300 100.00%
6.200 6.400 37,600 2.45% 526,900 96.34%
6.000 6.200 44,100 1.58% 417,700 91.72%
5.800 6.000 24,700 0.57% 110,200 88.06%
5.600 5.800 868,000 87.09%
5.400 5.600 143,300 79.48%
5.200 5.400 92,600 78.22%
5.000 5.200 940,500 77.41%
4.800 5.000 142,200 69.16%
4.600 4.800 20,200 67.92%
4.400 4.600 13,900 67.74%
4.200 4.400 - 67.62%
4.000 4.200 - 67.62%
3.800 4.000 117,100 67.62%
3.600 3.800 370,600 66.59%
3.400 3.600 250,900 63.34%
3.200 3.400 1,236,200 61.14%
--------------------------------------------------------------------------------------------------------
PROPOSED EXCHANGE PRICE 3.000 3.200 1,652,500 50,30%
--------------------------------------------------------------------------------------------------------
2.800 3.000 2,785,300 35.1% 130,000 100.00%
2.600 2.800 788,500 11.39% 249,100 96.12%
2.400 2.600 430,100 4.47% 270,800 88.69%
2.200 2.400 79,800 0.70% 1,044,100 80.61%
2.000 2.200 357,500 49.45%
1.800 2.000 311,500 38.78%
--------------------------------------------------------------------------------------------------------
CURRENT PRICE 1.600 1.800 277,900 29.48%
--------------------------------------------------------------------------------------------------------
1.400 1.600 710,000 21.19%
Less Than $1.400
---------- ---------- ----------- ----------
Total Stock for Period 8,478,600 4,349,500 11,403,800 3,350,900
Cumulative % of Total Traded 30.74% 15.77% 41.34% 12.15%
% Traded of Current Stock Out (b) 35.39% 18.16% 47.61% 13.99%
% Traded of Current Float (c) 70.15% 35.99% 94.36% 27.73%
Wtd. Average Stock Price $7.31 $7.07 $3.90 $2.09
<CAPTION>
- ---------------------------------------------------------------------
1995 - 1998 (a)
--------------------
Price Per Share Volume %
---------------------- --------------------
<S> <C> <C>
Greater Than $9,400
9.200 9,400 600 100.00%
9.000 9,200 - 100.00%
8.800 9,000 49,200 100.00%
8.600 8,800 6,800 99.82%
8.400 8,600 67,500 99.79%
8.200 8,400 289,100 99.55%
8.000 8,200 163,100 98.50%
7.800 8,000 920,900 97.91%
7.600 7,800 482,000 94.57%
7.400 7,600 378,300 92.82%
7.200 7,400 1,977,100 91.45%
7.000 7,200 6,697,600 84.29%
6.800 7,000 1,061,700 60.00%
6.600 6.800 498,500 56.15%
6.400 6.600 546,600 54.35%
6.200 6.400 564,500 52.37%
6.000 6.200 461,800 50.32%
5.800 6.000 134,900 48.64%
5.600 5.800 868,000 48.16%
5.400 5.600 143,300 45.01%
5.200 5.400 92,600 44.49%
5.000 5.200 940,500 44.15%
4.800 5.000 142,200 40.74%
4.600 4.800 20,200 40.23%
4.400 4.600 13,900 40.15%
4.200 4.400 - 40.10%
4.000 4.200 - 40.10%
3.800 4.000 117,100 40.10%
3.600 3.800 370,600 39.68%
3.400 3.600 250,900 38.34%
3.200 3.400 1,236,200 37.43%
-----------------------------------------
PROPOSED EXCHANGE PRICE 3.000 3.200 1,652,500 32.94%
-----------------------------------------
2.800 3.000 2,915,300 26.95%
2.600 2.800 1,037,600 16.38%
2.400 2.600 700,900 12.62%
2.200 2.400 1,123,900 10.08%
2.000 2.200 357,500 6.01%
1,800 2.000 311,500 4.71%
-----------------------------------------
CURRENT PRICE 1,600 1,800 277,000 3.58%
-----------------------------------------
1,400 1,600 710,000 2.57%
Less Than $1,400
-----------
Total Stock for Period 27,582,800
Cumulative % of Total Traded 100.00%
% Traded of Current Stock Out (b) 115.15%
% Traded of Current Float (c) 228.23%
Wtd. Average Stock Price $5.13
</TABLE>
__________________
(a) Through April 22, 1998.
(b) Based on 23,954,560 Class A shares outstanding
(c) Based on 12,085,729 Class A shares by institutional and retail public
holders.
Page 5
<PAGE>
OVERVIEW OF OIL
SHAREHOLDER ANALYSIS (a)
<TABLE>
<CAPTION>
================================================================================
Class A % Of Total
Institutions (b) Shrs. Held % Of Total Voting Power
- ------------------------------ ---------- ---------- ------------
<S> <C> <C> <C>
Dimensional Fund Adv. 621,000 2.6% 1.2%
CNA Financial Group 410,900 1.7% 0.8%
Barclays Bank plc 353,178 1.5% 0.7%
Deltec Asset Mgmt. 250,810 1.0% 0.5%
Frank Russell Company 236,386 1.0% 0.5%
Wellington Management 224,905 0.9% 0.5%
Vanguard Group 215,500 0.9% 0.4%
Fleming Overseas 202,611 0.8% 0.4%
Bear, Stearns & Co. 167,231 0.7% 0.3%
Fidelity Management 118,700 0.5% 0.2%
Mellon Bank 115,243 0.5% 0.2%
Northern Trust 85,611 0.4% 0.2%
ANB Investment Mgmt. 51,100 0.2% 0.1%
Prudential Insurance 47,300 0.2% 0.1%
World Asset Management 23,937 0.1% 0.0%
IBM Retirement Funds 16,300 0.1% 0.0%
Miss Pub-Dom Eq 4,600 0.0% 0.0%
DLJ Corp. 3,086 0.0% 0.0%
Beck, Mack & Oliver 3,000 0.0% 0.0%
Legg Mason 2,000 0.0% 0.0%
---------- ---------- ------------
All Institutions (c) 3,153,398 13.2% 6.3%
<CAPTION>
Class A Class C
Directors And Officers (C) Title Shrs. Held % Of Total Shrs. Held % Of Total
- ----------------------------- ------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Audrey L. Sevin Director and Secretary of Oil and Gas 1,876,863 7.8% 477,716 18.4%
Irik P. Sevin Chairman, CEO and Director of Oil 740,438 3.1% 201,641 7.8%
Phillip Ean Cohen Director of Oil 679,262 2.8% 113,423 4.4%
Thomas J. Edelman Director of Oil and Gas 653,312 2.7% 129,019 5.0%
Vincent De Palma VP and GM of New York Region 5,000 0.0% - 0.0%
Hanseatic Corporation (d) (e) 1,777,279 7.4% 298,717 11.5%
Tortosa (d) - 0.0% 298,717 11.5%
Wolfgang Traber (e) Director of Oil and Gas - 0.0% 9,038 0.3%
Paul Biddelman (e) Director of Oil and Gas 2,386 0.0% - 0.0%
---------- ---------- ---------- ----------
Total Directors & Officers Holdings 5,734.540 23.9% 1,528,271 58.8%
Class A Class C
5% Beneficial Owners Shrs. Held % Of Total Shrs. Held % Of Total
- ----------------------------- ---------- ---------- ---------- ----------
Schneider Capital 4,388,920 18.3% - 0.0%
Richard O'Connell 1,128,745 4.7% 302,461 11.6%
Barcel Corporation 616,626 2.6% 151,231 5.8%
---------- ---------- ---------- ----------
Total 5% Beneficial Holdings 6,134,291 25.6% 453,692 17.5%
<CAPTION>
Total % Of Total
Directors And Officers (C) Voting Power Voting Power
- ----------------------------- ----------- ------------
<S> <C> <C>
Audrey L. Sevin 6,654,023 13.3%
Irik P. Sevin 2,756,848 5.5%
Phillip Ean Cohen 1,813,492 3.6%
Thomas J. Edelman 1,943,502 3.9%
Vincent De Palma 5,000 0.0%
Hanseatic Corporation (d) (e) 4,764,449 9.5%
Tortosa (d) 2,987,170 6.0%
Wolfgang Traber (e) 90,380 0.2%
Paul Biddelman (e) 2,386 0.0%
----------- ------------
Total Directors & Officers Holdings 21,017,250 42.1%
Total % Of Total
5% Beneficial Owners Voting Power Voting Power
- ----------------------------- ----------- ------------
Schneider Capital 4,388,920 8.8%
Richard O'Connell 4,153,355 8.3%
Barcel Corporation 2,128,936 4.3%
----------- ------------
Total 5% Beneficial Holdings 10,671,211 21.4%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
% Of % Of Total % Of Total
Summary Class A Total Class C Total Voting Power Voting Power
- ------- ---------- --------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Insider Holdings
Directors and Officers as a Group 5,734,540 23.9% 1,528,271 58.8% 21,017,250 42.1%
5% Beneficial Owners 6,134,291 25.6% 453,692 17.5% 10,671,211 21.4%
---------- --------- ---------- ---------- ------------ ------------
11,868,831 49.5% 1,981,963 76.3% 31,688,461 63.5%
Public Holdings
Institutional 3,153,398 13.2% 3,153,398 6.3%
Retail 8,932,331 (f) 37.3% 8,932,331 17.9%
---------- --------- ------------ ------------
12,085,729 50.5% 12,085,729 24.2%
Other Holdings 615,556 23.7% 6,155,560 12.3%
---------- ---------- ------------ ------------
615,556 23.7% 6,155,560 12.3%
Total 23,954,560 100.0% 2,597,519 100.0% 49,929,750 100.0%
====================================================================================================================
</TABLE>
____________________________
(a) Based on shares outstanding, most recently available data as of 4/23/98 and
does not include options to purchase and Class B shares.
(b) Source: Vickers Stock Research Corporation, Bloomberg and Oil's Proxy.
(c) Does not include 5% beneficial ownership institutions.
(d) Hanseatic Corporation holds shared voting power in Tortosa.
(e) Mr. Traber and Mr. Biddelman are executive officers of Hanseatic
Corporation.
(f) AGE has 29,412 Class A shares in its system.
Page 6
<PAGE>
OVERVIEW OF OIL
RESEARCH COVERAGE
<TABLE>
<CAPTION>
WHILE OIL HAD DECENT RESEARCH COVERAGE DATE PUBLISHED ESTIMATES UPDATED
----------------- -------------- -----------------
<S> <C> <C> <C>
COVERAGE IN 1996, THERE
HAVE NOT BEEN ANY Published Research Reports
REPORTS PUBLISHED Bear Stearns 9/5/96 10/18/96
RECENTLY. DLJ 8/2/96 --
PaineWebber 7/16/96 11/11/97
Additional Research
Jefferies - Hold
</TABLE>
<TABLE>
<CAPTION>
EARNINGS ESTIMATES NUMBER OF ESTIMATES MEAN 1998 MEAN 1999
------------------ ------------------- --------- ---------
<S> <C> <C> <C>
IBES 1 $0.70 NA
Nelson 1 $0.70 NA
</TABLE>
Page 7
<PAGE>
OVERVIEW OF OIL
DISCOUNTED CASH FLOW ANALYSIS
WEIGHTED AVERAGE COST OF CAPITAL DERIVATION
($ IN MILLIONS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Implied Total Total
Market Unit Total Market Debt/ Debt as % Un-
Levered Val. Debt Price at Units Value of Total of Total levered
Comparable Company Beta (a) (Bk = Mkt) (4/22/98) Ont. (Mh) Equity Equity Capital Beta
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriGas Partners, L.P. 0.48 $777.8 $25.938 41.9 $1,108.6 70.2% 41.2% 0.282
Cornerstone Propane Partners, L.P. 0.40 235.8 22.688 19.7 455.7 51.7% 34.1% 0.264
Ferrellgas Partners, L.P. 0.38 537.2 20.875 31.3 666.6 80.6% 44.6% 0.210
Heritage Propane Partners, L.P. 0.43 176.9 23.125 8.4 197.8 89.4% 47.2% 0.227
National Propane Partners, L.P. 0.34 147.4 20.313 11.2 232.9 63.3% 38.8% 0.208
Star Gas Partners, L.P. 0.33 96.0 21.938 6.2 139.4 68.9% 40.8% 0.195
Suburban Propane Partners, L.P. 0.36 428.2 18.813 28.7 551.4 77.6% 43.7% 0.203
-----------------------------------------------
Comparable group's average Oil's capitalization--at market
unlevered beta: 0.23 Total debt (b) $314.5 87.9%
Oil's debt-to-equity ratio: 725.5% Common equity 43.3 12.1%
Oil's debt as a percent of total ------ -----
capital: 87.9% $357.8 100.0%
Comparable group's beta relevered -----------------------------------------------
for Oil's capital structure: 1.874
=====
Oil's capitalization - at market
Total debt(b) $314.5 87.9%
Common equity 43.3 12.1%
----- -----
$357.8 100.0%
<CAPTION>
Derivation of Weighted Average Cost of Capital: Market Risk Premium Range (e)
- ---------------------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11.3% 12.3% 13.3%
Oil's theoretical levered beta(d): 1.874
Assumed % of equity in Oil's capital
structure: 21.1%
Risk-free rate of return(c): 5.7%
Oil's cost of equity range (at
various market risk premiums): 26.9% 28.7% 30.6%
==== ==== ====
Oil's assumed tax rate: 0.0%
Assumed % of debt in capital
structure(b): 87.9%
Oil's estimated cost of debt(f): 11.2%
Oil's estimated after-tax cost of debt: 11.2% 11.2% 11.2% 11.2%
==== ==== ====
Oil's weighted average cost of capital
range(g): 13.1% 13.3% 13.6%
==== ==== ====
<CAPTION>
</TABLE>
- ------------
(a) Source: Bloomberg. (143 week (maximum weekly time period allowed, or the
number of weeks available, which may be less than 143) adjusted beta
relative to the S&P 500 index.
(b) Includes preferred stock; not net of cash.
(c) Ten-year Treasury rate on April 22, 1998.
(d) Bloomberg's reported beta for Oil is .63.
(e) Ibhotson Associates 1997. Total returns for small company stocks of 17.7%
minus the risk-free rate.
(f) Based on Oil's current debt structure.
(g) Calculation based upon use of the Capital Asset Pricing Model (CAPM).
<PAGE>
OVERVIEW OF OIL
EBITDA RECONCILIATION: 1997 (a)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
OIL
---
<S> <C> <C>
1997 Actual EBITDA $36,010
NORMALIZING ADJUSTMENTS:
Weather was 3.8% warmer than 30-year normal
3.8% of 1997 budgeted retail gallons 13,482 gallons
Gross profit margin $0.4545
Delivery and garage cost savings ($0.0814)
---------
Net impact per gallon $0.3731
$ impact 5,030
Insurance reserve 2,000
-------
1997 Adjusted EBITDA $43,040
=======
</TABLE>
- ------------------------------------------------------------------------------
(a) Management's assumptions.
Page 9
<PAGE>
OVERVIEW OF OIL
EBITDA RECONCILIATION: 1997 - 1998 (a)
(continued)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
OIL
---
<S> <C> <C>
1997 Adjusted EBITDA $43,040
Volume Adjustments for 1998
Sale of TLC Division in 1997 (16,926) gallons
Attrition in 1998 (4.1%) (17,375)
1997 Acquisitions 9,828
-------
(24,473) gallons
@
$0.1700/gallon (b) (4,159)
Gross Profit Margin Increase $0.006 per gallon on 395,086 gallons (c) 2,371
Inflation (3,662)
Operating Cost Reductions (d) 5,850
-------
1998 EBITDA Budget $43,440
=======
</TABLE>
-----------------------------------------------------------------------------
(a) Management's assumptions.
(b) Represents the average gross profit per gallon ($.4700 per gallon) offset
by $.30 per gallon reduction in operating expenses.
(c) Actual gross profit margin increase achieved in first quarter of 1998 was
$5.9 million (156 million gallons @ $0.037/gallon).
(d) Represents already accomplished reductions in branch, regional and
corporate expenses in excess of normal indexing related to volume
reductions as well as 1% productivity improvements.
Page 10
<PAGE>
OVERVIEW OF OIL
EBITDA RECONCILIATION: 1998 (a)
(continued)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
OIL
---
<S> <C>
1998 EBITDA Budget
$43,440
Normalized Acquisition Growth
$30,000 of acquisitions at 4.75x multiple 6,315
-------
1998 EBITDA Normalized $49,755
=======
1998 EBITDA Budget $43,440
Actual Differential between first three months
of Fiscal 1998 vs. Budget (9,318)
Revised margin improvement and cost savings
estimates based on first three months of
Fiscal 1998 vs. Budget. 4,378
-----
Adjusted 1998 EBITDA Budget $38,500
=======
</TABLE>
----------------------------------------------------------------------
(a) Management's assumptions.
Page 11
<PAGE>
OVERVIEW OF OIL
EBITDA RECONCILIATION: 1998-1999 (a)
(continued)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
OIL
---
<S> <C>
1998 EBITDA Normalized $49,755
Internal Attrition (4.1%) and other adjustments (4,413)
Normalized Acquisition Growth
$30,000 of acquisitions at 4.75x multiple 6,315
-------
1999 Projection $51,657
=======
</TABLE>
-----------------------------------------------------------------------
(a) Management's assumptions.
Page 12
<PAGE>
OVERVIEW OF OIL
EBITDA SUMMARY
<TABLE>
<CAPTION>
--------------------------------------------------------------
OIL
---
<S> <C>
1997 Actual $36,010
1997 Adjusted 43,040
1998 Budget $43,440
1998 Normalized 49,755
Adjusted 1998 Budget $38,500
1999E $51,657
</TABLE>
--------------------------------------------------------------
Page 13
<PAGE>
OVERVIEW OF OIL
ACQUISITION HISTORY
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Date EBITDA Acquired Cost per
Acquired Company Purchase Price EBITDA Multiple Gallonage Gallon
-------- ------- -------------- ------ -------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
1/26/93 Houck Service $ 663.9 $ 245.0 2.7x 807.2 $0.823
1/28/93 Harris and Gans 1,607.9 475.0 3.4x 2,599.6 0.619
5/28/93 Goodrich 2,397.7 672.0 3.6x 4,156.0 0.577
6/4/93 Warren 2,965.0 712.0 4.2x 14,448.3 0.205
6/23/93 Savin 1,655.4 403.0 4.1x 2,769.0 0.598
6/25/93 Baylis and Baylis 989.3 251.0 3.9x 1,224.7 0.808
7/28/93 Agway 1,660.6 315.0 5.3x 2,708.5 0.613
9/28/93 Garden State 1,015.2 312.0 3.3x 1,408.0 0.721
9/29/93 Essex 866.3 234.0 3.7x 2,649.4 0.327
1993 Totals $ 13,821 $ 3,619 3.8x 32,771 $0.422
--------- -------- ------ -------- ------
1/7/94 Petrilla Oil $ 189.5 $ 53.4 3.5x 329.0 $0.576
3/8/94 Rettig 1,813.0 466.0 3.9x 4,930.0 0.368
6/30/94 Deblois Oil 15,374.6 2,909.0 5.3x 19,869.0 0.774
7/26/94 Herbert Fuel 5,133.0 882.0 5.8x 6,103.0 0.841
7/28/94 Trico Fuel 3,126.3 930.0 3.4x 4,091.0 0.764
9/1/94 Sickley 1,261.4 355.0 3.6x 1,702.0 0.741
9/13/94 Sinkler 4,880.0 948.0 5.1x 7,433.0 0.657
12/1/94 Ryan 2,954.3 528.0 5.6x 4,804.0 0.615
12/2/94 Fowler 182.8 37.4 4.9x 354.0 0,516
1994 Totals $ 34,915 $ 7,109 4.9x 49,615 $0.704
--------- -------- ------ -------- ------
3/30/95 Reliable Oil $ 6,065.6 $1,183.0 5.1x 10,102.2 $0.600
5/24/95 Rosetta (Waldman) 3,413.2 684.0 5.0x 5,153.6 0.662
5/24/95 Rosetta (Price) 789.4 153.0 5.2x 1,309.5 0.603
7/27/95 Slocum 643.8 198.0 3.3x 742.6 0.867
8/23/95 Contex 1,856.8 448.0 4.1x 2,503.2 0.742
8/31/95 Rackliffe 546.2 139.0 3.9x 904.0 0.604
9/1/95 A-One 5,184.2 1,164.0 4.5x 5,900.0 0.879
9/11/95 Reading Merchants 4,260.0 656.0 6.5x 3,613.0 1.179
10/25/95 Franklin Fuel 293.5 76.0 3.9x 445.0 0,660
11/17/95 Home Fuel 2,158.9 430.0 5.0x 6,072.3 0.356
12/19/95 Texaco 3,854.8 1,071.0 3.6x 5,845.1 0.659
1995 Totals $ 29,066 $ 6,202 4.7x 42,590 $0.682
--------- -------- ------ -------- ------
</TABLE>
Page 14
<PAGE>
OVERVIEW OF OIL
ACQUISITION HISTORY
(continued)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
Date EBITDA Acquired Cost per
Acquired Company Purchase Price EBITDA Multiple Gallonage Gallon
-------- ------- -------------- ------ -------- --------- ------
<C> <S> <C> <C> <C> <C> <C>
1/11/96 Garrison $ 5,242.5 $1,154.0 4.5x 6,017.0 $0.871
1/19/96 Cibro 4,367.6 1,087.0 4.0x 6,200.0 0.704
2/1/96 Seaman 7,133.7 1,552.0 4.6x 7,522.0 0.948
4/1/96 McDowell 2,723.5 669.0 4.1x 2,675.0 1.018
9/11/96 Flynn 1,038.0 232.0 4.5x 1,316.0 0.789
9/24/96 Farren 263.6 69.0 3.8x 481.0 0.548
10/18/96 Bergen 3,202.5 718.0 4.5x 5,933.0 0.540
10/18/96 Hightstown 233.5 62.0 3.8x 500.0 0.467
10/31/96 Hy-Test 813.4 177.0 4.6x 1,468.0 0.554
12/18/96 Dexter 331.9 99.0 3.4x 796.0 0.417
12/26/96 Sherman 492.5 103.0 4.8x 564.0 0.873
12/27/96 Malco 369.2 97.0 3.8x 988.0 0.374
12/30/96 Grasso 422.9 116.0 3.6x 1,212.0 0.349
1996 Totals $ 26,635 $ 6,135 4.3x 35,672 $0.747
--------- -------- ------ ------- ------
1/15/97 Oils Inc $ 747.6 $ 188.0 4.0x 1,189.0 $0.629
4/14/97 Mugullian Fuel 2,801.9 638.0 4.4x 3,000.0 0.934
5/14/97 Alderfer Heating 401.1 111.0 3.6x 787.0 0.510
6/26/97 Bellomo 1,488.8 443.0 3.4x 1,657.0 0.898
7/10/97 Good 521.4 117.0 4.5x 1,200.0 0.434
8/29/97 Oil Burner 2,633.1 603.0 4.4x 3,500.0 0.752
9/10/97 Romary 2,252.5 545.0 4.1x 2,348.0 0.959
9/29/97 T. W. Perry 1,619.3 439.0 3.7x 2,118.0 0.765
10/1/97 MiliBrook 527.5 112.0 4.7x 908.0 0.581
11/24/97 Shreve 1,457.0 300.0 4.9x 2,425.0 0.601
12/18/97 Genovese 1,010.8 281.0 3.6x - -
1997 Totals $ 15,461 $ 3,777 4.1x 19,132 $0.808
--------- -------- ------ ------- ------
5 Year Totals $ 119,898 $ 26,842 4.5x $179,780 $0.667
========= ======== ====== ======== ======
</TABLE>
Page 15
<PAGE>
OVERVIEW OF OIL
MARGIN ANALYSIS
(VOLUME IN GALLONS; GALLONS AND $ IN THOUSANDS, EXCEPT MARGINS)
<TABLE>
<CAPTION>
====================================================================================================================================
Fiscal Years Ended December 31,
----------------------------------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
RETAIL (b)
Volume 355,347 360,207 343,759 375,121 338,478
Margin $ 0.4883 $ 0.5030 $ 0.5027 $ 0.4993 $ 0.5196
-------- -------- -------- -------- --------
Gross profit $173,501 $181,202 $172,811 $187,290 $175,867
COMMERCIAL
Volume 81,515 79,514 75,476 81,020 71,813
Margin $ 0.2301 $ 0.2416 $ 0.2458 $ 0.2471 $ 0.2452
-------- -------- -------- -------- --------
Gross profit $ 18,755 $ 19,214 $ 18,554 $ 20,018 $ 17,607
PROPANE
Volume 6,625 7,435 5,538 - -
Margin $ 0.5352 $ 0.5730 $ 0.5805 $ 0.0000 $ 0.0000
-------- -------- -------- -------- --------
Gross profit $ 3,546 $ 4,260 $ 3,215 - -
OTHER PETROLEUM PRODUCTS
Volume 36,406 35,709 31,228 32,026 29,855
Margin $ 0.1424 $ 0.1417 $ 0.1481 $ 0.1401 $ 0.1424
-------- -------- -------- -------- --------
Gross profit $ 5,183 $ 5,061 $ 4,624 $ 4,487 $ 4,251
TOTAL PETROLEUM PRODUCTS
Volume 479,893 482,865 456,001 488,167 440,146
Margin $ 0.4188 $ 0.4344 $ 0.4368 $ 0.4339 $ 0.4492
-------- -------- -------- -------- --------
Gross profit $200,985 $209,737 $199,204 $211,795 $197,725
-------- -------- -------- -------- --------
DISCOUNTS $ 1,294 $ 1,200 $ 944 $ 1,084 $ 802
-------- -------- -------- -------- --------
Net service loss ($34,243) ($37,941) ($33,822) ($37,386) ($35,184)
Net installation income 3,681 4,944 4,364 5,280 5,050
-------- -------- -------- -------- --------
Gross profit (loss) ($30,562) ($32,997) ($29,458) ($32,106) ($30,134)
-------- -------- -------- -------- --------
Gas Gross Profit - $ 5,756 $ 50,992 - -
Total Gross Profit $171,717 $183,696 $221,682 $180,773 $168,393
======== ======== ======== ======== ========
<CAPTION>
Projected Years Ended December 31, (a)
----------------------------------------------------------------------------------
1998 1999 2000 2001 2002
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
RETAIL (b)
Volume 362,070 376,560 390,457 403,784 416,564
Margin $ 0.5220 $ 0.5220 $ 0.5220 $ 0.5220 $ 0.5220
-------- -------- -------- -------- --------
Gross profit $189,001 $196,564 $203,819 $210,775 $217,446
COMMERCIAL
Volume 71,547 75,948 80,168 84,215 88,096
Margin $ 0.2502 $ 0.2502 $ 0.2502 $ 0.2502 $ 0.2502
-------- -------- -------- -------- --------
Gross profit $ 17,901 $ 19,002 $ 20,058 $ 21,071 $ 22,042
PROPANE
Volume - - - - -
Margin $ 0.000 $ 0.000 $ 0.000 $ 0.000 $ 0.000
-------- -------- -------- -------- --------
Gross profit - - - - -
OTHER PETROLEUM PRODUCTS
Volume 29,038 27,847 26,706 25,611 24,561
Margin $ 0.1379 $ 0.1379 $ 0.1379 $ 0.1379 $ 0.1379
-------- -------- -------- -------- --------
Gross profit $ 4,004 $ 3,840 $ 3,683 $ 3,532 $ 3,387
TOTAL PETROLEUM PRODUCTS
Volume 462,655 480,355 497,331 513,610 529,221
Margin $ 0.4559 $ 0.4568 $ 0.4576 $ 0.4583 $ 0.4589
-------- -------- -------- -------- --------
Gross profit $210,906 $219,407 $227,559 $235,378 $242,875
-------- -------- -------- -------- --------
DISCOUNTS $ 841 - - - -
-------- -------- -------- -------- --------
Net service loss (33,135) ($34,526) ($35,803) ($36,972) ($38,038)
Net installation income 5,627 6,610 7,612 8,632 9,668
-------- -------- -------- -------- --------
Gross profit (loss) ($27,508) ($27,916) ($28,191) ($28,340) ($28,370)
-------- -------- -------- -------- --------
Gas Gross Profit - - - - -
Total Gross Profit $ 184,239 $191,491 $199,368 $207,037 $214,505
========= ======== ======== ======== ========
</TABLE>
______________________________________________________________________________
(a) Assumes 4.1% steady attrition, 0% margin improvement, and $30 million in
acquistions at 4.?5 multiple.
(b) Includes protected ????? volumes
Page 16
<PAGE>
OVERVIEW OF OIL
ATTRITION ANALYSIS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Average Accounts Absolute Account Losses Loss Rate Gains Net Attrition Rate
---------------------------- --------------------------- ------------------- ------------------ ------------------
Base Business, Base Business, Base
Year Total excl. Acquisitions Total excl. Acquisitions Total Base Accounts % Total Business
- ------ ----- ------------------ ----- ------------------ ------ -------- -------- ----- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993 391,454 352,576 70,127 56,459 17.9% 16.0% 47,090 12.0% -5.9% -4.0%
1994 386,235 354,786 57,442 46,386 14.9% 13.1% 35,380 9.2% -5.7% -3.9%
1995 381,842 344,342 59,550 46,366 15.6% 13.5% 34,516 9.0% -6.6% -4.5%
1996 386,398 354,471 60,084 48,860 15.5% 13.8% 39,192 10.1% -5.4% -3.7%
1997 366,421 342,738 60,907 52,581 16.6% 15.3% 39,561 10.8% -5.8% -4.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Mean 382,470 349,783 61,622 50,130 16.1% 14.3% 39,148 10.2% -5.9% -4.1%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 17
<PAGE>
OVERVIEW OF GAS
SUMMARY FINANCIAL ANALYSIS
($ in thousands, except per unit data)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
State of Incorporation: Delaware Market Price (4/22/98): $21,938
Headquarters: Stanford, CT 52- Week High-Low $24,750 - 19,000
Auditors: KPMG Peat Marwick LLP Common, Sub, And GP Units Outstanding: 6,355
Primary Exchange: NASDAQ Most Recent Fiscal Year End: 9/30/97
Primary Area of Focus: Midwest, Northeast US
Selected Data
- -----------------------------------------------------------------------------------------------------------
Total Net Earnings Distributable Distributable
Year Revenues EDITDA (a) Income Per Unit Cash Flow CF/Unit CapEx.
- ---------- -------- ---------- ------ -------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $119,634 $19,870 $2,593 $0.49 $10,361 $1.97 $5,332
1997 135,159 19,703 1,972 0.37 9,612 1.82 5,279
Proj. 1998 (b) 121,024 18,279 (1,321) (0.21) 7,737 1.22 4,551
Proj. 1999 (b) 156,296 26,730 3,691 0.54 14,317 2.09 5,071
<CAPTION>
- ----------------------------------------------------
Book Capitalization
-------------------
(12/31/97)
----------
<S> <C>
Total Debt $ 96,600
Total Partners' Capital 71,883
---------
Total $ 167,883
=========
Estimated Firm Value
--------------------
Total Debt $ 96,000
Implied Market Val. of Equity (c) 139,411
---------
Total $ 235,411
---------
Less: Cash and Equivalents 3,452
---------
Net Firm Value $ 231,959
=========
Multiple Analysis
-----------------
Net Firm Value/97A EDITDA: 11.8x
Net Firm Value/98E EDITDA: 12.7
Net Firm Value/99E EDITDA: 8.7
1997A Common Unit coverage 1.5x
1998E Common Unit coverage 0.9
1999E Common Unit coverage 1.5
1997A Total Distribution coverage 0.8x
1999E Total Distribution coverage 0.6
1999E Total Distribution coverage 1.0
- ----------------------------------------------------
</TABLE>
________________________________________________________________________________
(a) EBITDA is defined as gross profit less operating expenses.
(b) Source: management's projections; 1998 EBITDA is before acquisitions,
adjusted for actual 1Q results. See pages 25 to 26.
(c) Implied equity value equals common, subordinated, and GP units,
multiplied by the market price of common units.
Page 18
<PAGE>
OVERVIEW OF GAS
SELECTED FINANCIAL DATA
($ in thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Historical Years Ended September 30,
-------------------------------------------------------------------------------------------
1996 % 1997 % 1997 (a) %
<S> <C> <C> <C> <C> <C> <C>
Sales $119,634 100.0% $135,159 100.0% $149,766 100.0%
% Growth 17.0% 13.0% 25.2% (c)
Cost of sales 58,557 48.9% 72,211 53.4% 80,370 53.7%
----------------- ----------------- --------------------
Gross profit 61,077 51.1% 62,948 46.6% 69,396 46.3%
Operating expenses 41,207 34.4% 43,245 32.0% (d) 46,408 31.0%
Net (loss) on sales of assets (260) -0.2% (295) -0.2% (265) -0.2%
Depreciation and amortization 9,808 8.2% 10,405 7.7% 11,495 7.7%
----------------- ----------------- --------------------
Operating income 9,802 8.2% 9,003 6.7% 11,228 7.5%
Interest expense, net 7,124 6.0% 6,966 5.2% 7,766 5.2%
----------------- ----------------- --------------------
Income (loss) before income taxes 2,678 2.2% 2,037 1.5% 3,462 2.3%
Income taxes 85 0.1% 25 0.0% 25 0.0%
General Partners' interest - 0.0% 40 0.0% 69 0.0%
----------------- ----------------- --------------------
Net income $ 2,593 2.2% $ 1,972 1.5% $ 3,368 2.2%
================= ================= ====================
Net income per limited partner
unit $ 0.49 $ 0.37 $ 0.54
========= ========= ==========
Weighted average L.P. units
outstanding 5,271 5,271 6,228
EBITDA (e) $ 19,870 16.6% $ 19,703 14.6% $ 22,988 15.3%
Capital expenditures $ 5,332 $ 5,279 $ 5,579
Maintenance capital expenditures 2,300 3,100 3,400
Distributable cash flow 10,361 9,612 11,797
Distributable cash flow per unit $ 1.97 $ 1.82 $ 1.89
Common distribution coverage 1.8x 1.5x 1.4x
Total distribution coverage 0.9x 0.8x 0.8X
EBITDA/total assets 12.7% 13.4% 12.8%
Net income / partners' capital 4.2% 3.8% 4.7%
<CAPTION>
- --------------------------------------------------------------------------------------------
Projected Years Ending September 30,
-----------------------------------------------------
1998 (b) % 1999 (b) %
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $121,024 100.0% $156,296 100.0%
% Growth -19.2% 29.1%
Cost of sales 58,041 48.0% 77,391 49.5%
----------------- -----------------
Gross profit 62,983 52.0% 78,905 50.5%
Operating expenses 44,704 36.9% 52,175 33.4%
Net (loss) on sales of assets 0.0% - 0.0%
Depreciation and amortization 11,768 9.7% 13,900 8.9%
----------------- -----------------
Operating income 6,511 5.4% 12,830 8.2%
Interest expense, net 7,807 6.5% 9,114 5.8%
----------------- -----------------
Income (loss) before income taxes (1,296) -1.1% 3,716 2.4%
Income taxes 25 0.0% 25 0.0%
General Partners' interest - 0.0% - 0.0%
----------------- -----------------
Net income ($ 1,321) -1.1% $ 3,691 2.4%
================= =================
Net income per limited partner
unit ($ 0.21) $ 0.54
========= =========
Weighted average L.P. units
outstanding 6,355 6,840
EBITDA (e) $ 18,279 15.1% $ 26,730 17.1%
Capital expenditures $ 4,551 $ 5,071
Maintenance capital expenditures $ 2,710 $ 3,274
Distributable cash flow 7,737 14,317
Distributable cash flow per unit $ 1.22 $ 2.09
Common distribution coverage 0.9x 1.5x
Total distribution coverage 0.6x 1.0x
EBITDA/total assets 10.4% 15.1%
Net income / partners'capital -2.1% 6.8%
</TABLE>
________________________________
(a) Proforma for December 16, 1997 common unit offering and the acquisition of
Pearl Gas Co.
(b) Projected figures per Management.
(c) Growth over 1996.
(d) Includes $350 in special project expenses.
(e) Excludes loss from sale of assets.
Page 19
<PAGE>
OVERVIEW OF GAS
MARKET PRICE ANALYSIS
PRICE AND VOLUME
12/15/95 - 4/22/98
[CHART APPEARS HERE]
Page 20
<PAGE>
OVERVIEW OF GAS
COMMON UNIT TRADING HISTORY - VOLUME DISTRIBUTION
1995-1998 (A)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Dec. 15-31 1995 1996 1997 1998 (a)
------------------- -------------------- -------------------- ---------------------
Price Per Share Volume % Volume % Volume % Volume %
--------------------- ------------------- -------------------- -------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Greater than $24.600
24.400 24.600 32,400 100.00%
24.200 24.400 55,300 99.34% 26,000 100.00% 75,500 100.00%
24.000 24.200 27,200 98.20% 25,800 99.24% - 96.47%
23.800 24.000 436,500 97.65% 38,400 98.49% - 96.47%
23.600 23.800 119,200 88.71% 3,000 97.37% 131,200 96.47%
23.400 23.600 79,500 86.27% 56,900 97.28% 85,600 90.32%
23.200 23.400 105,000 84.64% 194,500 95.62% 173,700 86.31%
23.000 23.200 396,900 82.49% 148,000 89.94% 51,400 78.18%
22.800 23.000 229,200 74.36% 102,100 85.62% 36,200 75.77%
22.600 22.800 96,100 69.67% 184,500 82.64% 42,700 74.08%
22.400 22.600 273,800 67.70% 145,500 77.26% 148,600 72.08%
22.200 22.400 33,400 100.00% 430,500 62.09% 128,000 73.01% 603,100 65.12%
22.000 22.200 762,000 95.80% 510,900 53.28% 217,500 69.27% 205,600 36.89%
-------------------------------------------------------------------------------------------------------------------
Current Price 21.800 22.000 400,400 42.82% 411,600 62.92% 299,800 27.26%
-------------------------------------------------------------------------------------------------------------------
21.600 21.800 422,600 34.62% 302,200 50.91% 155,300 13.22%
21.400 21.600 259,400 25.96% 290,200 42.09% 127,100 5.95%
21.200 21.400 214,300 20.65% 372,800 33.62%
21.000 21.200 388,000 16.26% 499,100 22.74%
20.800 21.000 110,900 8.32% 108,000 8.17%
20.600 20.800 137,500 6.05% 34,300 5.01%
20.400 20.600 41,900 3.23% 16,000 4.01%
20.200 20.400 62,800 2.38% 46,500 3.55%
20.000 20.200 53,200 1.09% 22,000 2.19%
19.800 20.000 24,400 1.55%
19.600 19.800 28,600 0.83%
Less Than $19.600
------- --------- --------- ---------
Total Units for Period 795,400 4,883,500 3,425,900 2,135,800
Cumulative % of Total Traded 7.08% 43.45% 30.48% 19.00%
% Traded of Current Units Out. (b) 20.76% 127.45% 89.41% 55.74%
Wtd. Average Unit Price $22.11 $22.25 $21.89 $22.47
<CAPTION>
- -----------------------------------------------------------------
1995-1998 (a)
---------------------
Price Per Share Volume %
--------------------- ---------------------
<S> <C> <C> <C> <C>
Greater than $24.600
24.400 24.600 32,400 100.00%
24.200 24.400 156,800 99.71%
24.000 24.200 53,000 98.32%
23.800 24.000 474,900 97.85%
23.600 23.800 253,400 93.62%
23.400 23.600 222,000 91.37%
23.200 23.400 473,200 89.39%
23.000 23.200 596,300 85.18%
22.800 23.000 367,500 79.88%
22.600 22.800 323,300 76.61%
22.400 22.600 567,900 73.73%
22.200 22.400 1,195,000 68.68%
22.000 22.200 1,696,000 58.05%
--------------------------------------------------
Current Price 21.800 22.000 1,111,800 42.96%
--------------------------------------------------
21.600 21.800 880,100 33.07%
21.400 21.600 676,700 25.24%
21.200 21.400 587,100 19.22%
21.000 21.200 887,100 14.00%
20.800 21.000 218,900 6.10%
20.600 20.800 171,800 4.16%
20.400 20.600 57,900 2.63%
20.200 20.400 109,300 2.11%
20.000 20.200 75,200 1.14%
19.800 20.000 24,400 0.47%
19.600 19.800 28,600 0.25%
Less Than $19.600
----------
Total Units for Period 11,240,600
Cumulative % of Total Traded 100.00%
% Traded of Current Units Out. (b) 293.36%
Wtd. Average Unit Price $22.17
</TABLE>
________________________________________
(a) Through April 22, 1998.
(b) Based on 3,831,727 common units outstanding.
Page 21
<PAGE>
OVERVIEW OF GAS
UNITHOLDER ANALYSIS (a)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON
INSTITUTIONS (b) UNITS HELD % OF TOTAL
- ---------------------- ---------- ----------
<S> <C> <C>
Bear, Stearns & Co. 47,700 1.2%
PaineWebber Group 38,750 1.0%
Graver Bokhof 28,400 0.7%
DLJ Corp. 24,331 0.6%
Orion Capital Corp. 16,000 0.4%
Advest Group, Inc. 10,900 0.3%
CIBC Oppenheimer 1,000 0.0%
Legg Mason Wood Walker 500 0.0%
U.S. Trust Co. NY 500 0.0%
Cullen/Frost Bankers 300 0.0%
------- ------
All Institutions 168,381 4.4%
<CAPTION>
- ----------------------------------------------------------------------------------------------
COMMON SUBORDINATED
DIRECTORS AND OFFICERS TITLE UNITS HELD % OF TOTAL UNITS HELD % OF TOTAL
- ---------------------- ---- ---------- ---------- ------------ ----------
<C> 10,400 0.3% - 0.0%
Wolfgang Traber Gas Director and Oil Director 525 0.0% - 0.0%
Richard F. Ambury V.P. of Finance --------- ---- ---------- --------
Total Directors & Officers Holdings 10,925 0.3% - 0.0%
Common Subordinated
General Partner Units Held % of Total Units Held % of Total
- -------------------- ----------- ---------- ----------- ----------
OIL 60,727 1.6% 2,396,078 100.0%
- -------------------------------------------------------------------------------------------------
SUMMARY
- -------
Common % of Subordinated % of
INSIDER HOLDINGS Units Total Units total
------ ----- ------------ -----
Directors and Officers as a Group 10,925 0.3% - 0.0%
General Partner 60,727 1.6% 2,396,078 100.0%
------ ------ ----------- -----
71,652 1.9% 2,396,078 100.0%
PUBLIC HOLDINGS
Institutional 168,381 4.4%
Retail 3,591,694 (c) 93.7%
------------- ------
3,760,075 98.1%
TOTAL UNITS OUTSTANDING 3,831,727 100.0% 2,396,078 100.0%
- ---------------------------------------------------------------------------------------------------
</TABLE>
- ------------------
(a) Based on units outstanding and most recently available data as of 4/23/98.
(b) Source: Vickers Stock Research Corporation and Bloomberg.
(c) AGE has 226,060 Common Units in its system.
Page 22
<PAGE>
OVERVIEW OF GAS
RESEARCH COVERAGE
<TABLE>
<CAPTION>
Gas has ongoing Research Coverage Date Published Estimates Updated
research coverage by ----------------- -------------- -----------------
two firms. <S> <C> <C> <C>
Published Research Reports
A.G. Edwards - Buy 1/5/98 4/8/98
PaineWebber - Attractive 12/30/97 2/5/98
Lehman 2/7/96 11/4/96
Earnings Estimates Number of Estimates Mean 1998 Mean 1999
------------------ ------------------- --------- ---------
IBES 2 $0.82 $0.85
Nelson 2 $0.52 $0.88
Zacks 2 $0.48 $0.88
</TABLE>
Page 23
<PAGE>
OVERVIEW OF GAS
DISCOUNTED CASH FLOW ANALYSIS
WEIGHTED AVERAGE COST OF CAPITAL DERIVATION
($ IN MILLIONS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Implied Total Total
Market Unit Total Market Debt/ Debt as % Un-
Levered Val. Debt Price at Units Value of Total of Total Levered
Comparable Company Beta (a) (Bk = Mkt) (4/22/98) Out. (Mil) Equity Equity Capital Beta
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriGas Partners, L.P. 0.48 $777.8 $ 25.938 41.9 $1,108.6 70.2% 41.2% 0.282
Cornerstone Propane Partners, L.P. 0.40 235.8 22.688 19.7 455.7 51.7% 34.1% 0.264
Ferrellgas Partners, L.P. 0.38 537.2 20.875 31.3 666.6 80.6% 44.6% 0.210
Heritage Propane Partners, L.P. 0.43 176.9 23.125 8.4 197.8 89.4% 47.2% 0.227
National Propane Partners, L.P. 0.34 147.4 20.313 11.2 232.9 63.3% 38.8% 0.208
Star Gas Partners, L.P. 0.33 96.0 21.938 6.2 139.4 68.9% 40.8% 0.195
Suburban Propane Partners, L.P. 0.36 428.2 18.813 28.7 551.4 77.6% 43.7% 0.203
--------------------------------------------------------
Gas' capitalization - at market (b)
Comparable group's average unlevered beta: 0.23 Total debt $ 96.0 40.8%
Gas' debt - to - equity ratio (b): 68.9% Common equity 139.4 59.2%
------ -----
Gas' debt as a percent of total capital (b): 40.8% $235.4 100.0%
--------------------------------------------------------
Comparable group's beta relevered for Gas' capital structure: 0.329
=====
DERIVATION OF WEIGHTED AVERAGE COST OF CAPITAL:
- -----------------------------------------------
MARKET RISK PREMIUM RANGE (d)
---------------------------------
11.3% 12.3% 13.3%
---------------------------------
Gas' theoretical levered beta: 0.329
Assumed % of equity in Gas' Capital structure (b): 59.2%
Risk - free rate of return (c): 5.7%
Gas' cost of equity range (at various market risk premiums): 9.4% 9.7% 10.1%
==== ==== =====
Gas' assumed tax rate: 35.0%
Assumed % of debt in capital structure (b): 40.8%
Gas' estimated cost of debt (e): 7.9%
Gas' estimated after - tax cost of debt: 5.2% 5.2% 5.2% 5.2%
---------------------------------
Gas' weighted average cost of capital range (f): 7.7% 7.9% 8.1%
---------------------------------
</TABLE>
- ---------------------------
(a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the
number of weeks available, which may be less than 143) adjusted beta
relative to the S&P 500 index.
(b) Market value of debt is assumed to be equal to the book value; debt is not
net of cash.
(c) Ten - year Treasury rate on April 22, 1998.
(d) Ibbotson Associates 1997. Total returns for small company stocks of 17.7%
minus the risk-free rate.
(e) Based on Gas' current debt structure.
(f) Calculation based upon use of the Capital Asset Pricing Model (CAPM).
Page 24
<PAGE>
OVERVIEW OF GAS
EBITDA RECONCILIATION: 1997 (a)
($ IN THOUSANDS)
-------------------------------------------------------------------------
GAS
---
1997 Actual EBITDA $19,703 (b)
NORMALIZING ADJUSTMENTS:
Weather
Residential - 1,125 gallons @ 0.7106 margin 799
Commercial - 277 gallons @ 0.4459 margin 124
Margin
Residential - 50,832 gallons @ (0.7106 - 0.6995) (564)
Commercial - 19,864 gallons @ (0.4454 - 0.4348) (220)
Wholesale - 38,404 gallons @ (0.0975 - 0.0675) (1,152)
Compensation (56)
Elimination of strategic expense 902 (c)
Pearl Gas EBITDA 3,012
Pearl Gas acquisition adjustments 273 (d)
-------
1997 Adjusted EBITDA $22,821
=======
-----------------
(a) Management's assumptions.
(b) Not pro forma for Pearl Gas acquisition.
(c) Certain expenses including the exploration of strategic
alternatives by Morgan Stanley.
(d) Certain cost savings, primarily salary and benefit expenses of
certain selling shareholders.
Page 25
<PAGE>
OVERVIEW OF GAS
EBITDA RECONCILIATION: 1997-1999 (a)
($ IN THOUSANDS)
(continued)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
GAS
---
<S> <C>
1998 EBITDA Budget $22,781
Actual Differential between first six months (4,502)
of Fiscal 1998 vs. Budget -------
Adjusted 1998 EBITDA Budget $18,279
=======
1998 EBITDA Budget $22,781
Internal Growth of 1.7% 379
Acquisition Growth
$20 million of acquisitions at 7x multiple
completed on 9/30/98 2,857
$10 million of acquisitions at 7x multiple
completed on 4/1/99 713
-------
1999 EBITDA Projection $26,730
=======
</TABLE>
-----------------------------------------------------------------------------
(a) Management's assumptions.
Page 26
<PAGE>
OVERVIEW OF GAS
ACQUISITION HISTORY
($ IN THOUSANDS)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
DATE EBITDA ACQUIRED COST PER
ACQUIRED COMPANY PURCHASE PRICE EBITDA MULTIPLE GALLONAGE GALLON
-------- ------- -------------- ------ -------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
6/15/94 Loveland $ 700.0 $ 127.0 5.5x 433.0 $1.616
11/24/94 Baystate 1,450.0 209.0 6.9x 768.7 $1.886
9/12/95 Debolt 950.0 151.0 6.3x 852.3 $1.115
3/22/96 Bob While L.P. Gas/ 1,500.0 263.0 5.7x 897.7 $1.671
Mitchell Bottle Gas
7/22/96 Fuzzy Moore 850.0 147.0 5.8x 454.3 $1.871
10/22/97 Pearl Gas Co. 24,126.0 3,288.0 7.3x 14,000.0 $1.723
2/20/98 Tri-County Gas 550.0 108.0 5.1x 319.7 $1.720
--------- ------- --------
4 YEAR TOTALS $ 30,126 $ 4,293 7.Ox 17,726 $1.700
========= ======= ======= ======== ======
Pending Como 15,500.0 2,450.0 6.3x
Pending Tioga 4,100.0 625.0 6.6x
</TABLE>
Page 27
<PAGE>
OVERVIEW OF GAS
MARGIN ANALYSIS
(VOLUME IN GALLONS; GALLONS AND $ IN THOUSANDS, EXCEPT MARGINS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
FISCAL YEARS ENDED SEPTEMBER 30,
-------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1997
---------- -------- -------- -------- ----------- --------
Stand alone Pro Forma
Weather
<S> <C> <C> <C> <C> <C> <C>
Residential
Volume 44,590 48,430 45,235 54,336 49,707 50,832
Margin $ 0.6902 $ 0.6861 $ 0.6677 $ 0.6592 $ 0.7106 $ 0.7106
---------- -------- -------- -------- --------- --------
Gross profit $ 30,777 $ 33,228 $ 30,203 $ 35,818 $ 35,322 $ 36,121
Commercial
Volume 17,617 19,875 18,831 21,194 19,587 19,864
Margin $ 0.4614 $ 0.4611 $ 0.4271 $ 0.4202 $ 0.4459 $ 0.4459
---------- -------- -------- -------- --------- --------
Gross profit $ 8,129 $ 9,164 $ 8,043 $ 8,906 $ 8,734 $ 8,858
Agriculture
Volume 23,291 16,053 15,080 12,567 17,338 17,338
Margin $ 0.2349 $ 0.2630 $ 0,2357 $ 0.2556 $ 0.2694 $ 0.2694
---------- -------- -------- -------- --------- --------
Gross profit $ 5,471 $ 4,222 $ 3,554 $ 3,212 $ 4,671 $ 4,671
Motor fuel & Other
Volume 7,581 8,060 8,056 8,197 8,024 8,024
Margin $ 0.4922 $ 0.5359 $ 0.5271 $ 0.5215 $ 0.5765 $ 0.5765
---------- -------- -------- -------- --------- --------
Gross profit $ 3,731 $ 4.319 $ 4,246 $ 4,275 $ 4,626 $ 4,626
Wholesale
Volume 51,493 45,318 38,941 39,025 38,404 38,404
Margin $ 0.0619 $ 0.0680 $ 0.0568 $ 0.0704 $ 0.0975 $ 0.0975
---------- -------- -------- -------- --------- --------
Gross profit $ 3,189 $ 3,082 $ 2,212 $ 2,747 $ 3,743 $ 3,743
Total Propane
Volume 144,572 137,736 126,143 135,319 133,060 134,462
Margin $ 0.3548 $ 0.3922 $ 0.3826 $ 0.4061 $ 0.4291 $ 0.4315
---------- -------- -------- -------- --------- --------
Total propane gross profit $ 51,297 $ 54,015 $ 48,258 $ 54,958 $ 57,096 $ 58,019
---------- -------- -------- -------- --------- --------
Appliances/other
Revenue $ 9,237 $ 9,454 $ 7,536 $ 8,269 $ 8,043 $ 8,043
Cost 3,232 3,187 1,935 2,150 2,191 2,191
---------- -------- -------- -------- --------- --------
Gross profit $ 6,005 $ 6,267 $ 5,601 $ 6,119 $ 5,852 $ 5,852
TOTAL GROSS PROFIT $ 57,302 $ 60,282 $ 53,859 $ 61,077 $ 62,948 $ 63,871
========== ======== ======== ======== ========= ========
<CAPTION>
- ------------------------------------------------------------------------------------------
FISCAL YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------------
1997 1998 1998
-------------------- ---------- --------------
Pro Forma Pearl and Budget Adjusted
Weather for actual
<S> <C> <C> <C>
Residential
Volume 62,630 63,614 56,037
Margin $ 0.6554 $ 0.6436 $ 0.6585
---------- -------- --------
Gross profit $ 41,049 $ 40,945 $ 36,898
Commercial
Volume 20,936 20,521 19,126
Margin $ 0.4399 $ 0.4278 $ 0.4431
---------- -------- --------
Gross profit $ 9,209 $ 8,779 $ 8,474
Agriculture
Volume 18,275 16,615 18,224
Margin $ 0.2678 $ 0.2633 $ 0.2537
---------- -------- --------
Gross profit $ 4,895 $ 4,375 $ 4,624
Motor fuel & other
Volume 8,391 8,381 8,298
Margin $ 0.5926 $ 0.5845 $ 0.5924
---------- -------- --------
Gross profit $ 4,973 $ 4,899 $ 4,916
Wholesale
Volume 38,532 40,597 32,474
Margin $ 0.0972 $ 0.0674 $ 0.0604
---------- -------- --------
Gross profit $ 3,744 $ 2,738 $ 1,961
Total propane
Volume 148,764 149,728 134,159
Margin $ 0.4293 $ 0.4123 $ 0.4239
---------- -------- --------
Total propane gross profit $ 63,870 $ 61,735 $ 56,874
Appliances/other
Revenue $ 8,760 $ 8,694 $ 8,509
Cost 2,303 2,298 2,399
---------- -------- --------
Gross profit $ 6,457 $ 6,396 $ 6,110
TOTAL GROSS PROFIT $ 70,327 $ 68,130 $ 62,983
========== ======== ========
</TABLE>
Page 28
<PAGE>
PRO FORMA OWNERSHIP ANALYSIS
GAS
CURRENT OWNERSHIP AND ORGANIZATION
[CHART APPEARS HERE]
Page 29
<PAGE>
PRO FORMA OWNERSHIP ANALYSIS
EFFECTIVE OWNERSHIP OF GAS - CURRENT
CURRENTLY, THE DIRECTORS
AND OFFICERS OF OIL
EFFECTIVELY CONTROL 100%
OF OIL (IN TERMS OF [CHART APPEARS HERE]
VOTING RIGHTS), 100% OF
GAS' GP INTEREST, AND
CONTROL 39% OF GAS'
LIMITED PARTNERSHIP UNITS.
Page 30
<PAGE>
SUMMARY OF TRANSACTION
PRO FORMA GAS UNITS OUTSTANDING
(IN THOUSANDS)
TO SIMPLIFY THE [_] There are currently 6,355 Gas units
COMPLEXITY OF THE STEPS outstanding comprised of 3,832 common units,
IN THE TRANSACTION, 2,396 subordinated units and 127 general
A.G. EDWARDS PREPARED partner ("GP") units. The subordinated units
A SUMMARY OF ITS and GP units are assets of Oil.
UNDERSTANDING.
[_] There are currently 26,563 shares of Oil
common stock outstanding, comprised of public
shareholders and "insiders." The public holds
17,160 Class A shares. The "insiders" hold
9,404 shares which include 6,795 Class A
shares, 11 Class B shares and 2,598 Class C
shares.
[_] Each shareholder of Oil will receive a
certain number of units in Gas such that the
implied consideration paid for each Oil share
is $3.15.
[_] The publicly held 17,160 Class A shares will
receive .1596 shares of newly created Senior
Subordinated units (2,738 units in total)
with an implied value of $19.74/unit. This
represents an implied purchase price of
$3.15/share for an implied total purchase
price of $54.1 million.
[_] The "insiders" of Oil, who hold a total of
9,404 shares (comprised of A, B and C shares)
will also receive $3.15/share for a total of
$29.6 million. The consideration received by
these shareholders will be funded by:
- (1) the distribution of existing units
of Gas which are currently owned by
Oil
[_] all of the 127 GP units owned
by Oil will be given as
consideration at an implied
value of $21.28/unit, for a
total of $2.7 million.
[_] 754 of the 2,396 Subordinated
units owned by Oil will be
given as consideration at an
implied value of $16.33/unit,
for a total of $12.3 million.
- (2) the distribution of newly-created
units of Gas
[_] to fund the remaining $14.6
million of the $29.6 million
due to the Oil "insiders", Gas
will issue 559 newly-created
Senior Subordinated units and
168 newly-created GP units.
The implied values for these
new units are $19.74 and
$21.28, respectively.
Page 31
<PAGE>
SUMMARY OF TRANSACTION
PRO FORMA GAS UNITS OUTSTANDING
(IN THOUSANDS)
(continued)
[_] Of the 2,396 Subordinated units and 127 GP
units owned by Oil, only 1,642 Subordinated
units will not have been used as
consideration paid to the "inside" Oil
shareholders. Hence, these 1,642 Subordinated
units will be retired by Gas. A.G. Edwards
has assumed that the implied value of these
units are $16.33/unit for a total retired
value of approximately $26.8 million.
Page 32
<PAGE>
SUMMARY OF GAS UNITS OUTSTANDING
PRE-FINANCING ASSUMPTIONS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Distributed to Oil Issued to Oil
------------------ -----------------
Type of Units Current Public Insiders Public Insiders Retired Pro Forma
------------- ------- ------ -------- ------ -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Common 3,832 - - - - - 3,832
Senior Subordinated - - - 2,738 559 - 3,297
Subordinated 2,396 - 754 - - 1,642 754
General Partner (a) 127 - 127 - 168 - 295
------ ---------
6,355 8,178
</TABLE>
________________________
(a) The number of GP units issued reflect the assumption of a 6,587 common
unit equity offering to refinance certain of the assumed Oil debt.
Hence, the number of GP units reflected in the pro forma column do not
equal 2% of the pro forma outstanding units shown above but do equal
exactly 2% of the pro forma units outstanding on a post financing
basis.
Page 33
<PAGE>
EQUITY PURCHASE PRICE CALCULATION
IMPLIED EQUITY VALUE OF OIL'S ASSETS
(units in thousands, $ in millions, except per unit amounts)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Purchase Price of Oil's Equity Purchase Price of Oil's Equity
------------------------------ --------------------------------------------------------
Value of Securities Equity Value of Oil's Value of Oil's GP and
Event Paid of Oil Shareholders Heating Oil Assets Subordinated Units in Star
- --------------------------------- ------------------------------ -------------------------- ---------------------------
<S> <C> <C> <C>
Issuance of Senior Subordinated
Units to Public Oil Shareholders 2,738 x $19.74
-------------------
$54.1 $54.1 -
Distribution of General Partner
Units to Inside Oil Shareholders 127 x $21.28
-------------------
$2.7 - $2.7
Distribution of Subordinated
Units of Inside Oil Shareholders 754 x $16.33
-------------------
$12.3 - $12.3
Issuance of General Partner
Units to Inside Oil Shareholders 168 x $21.28
-------------------
$3.6 $3.6 -
Issuance of Senior Subordinated
Units to Inside Oil Shareholders 559 x $19.74
-------------------
$11.0 $11.0 -
Retire Subordinated Units 1,642 x $16.33
-------------------
($26.8) $26.8
$41.8 $41.8
----- ---------------------------------
Total $83.7 $83.7
Divided by 26,563 shares of Oil's
Common Stock= $3.15 per share
</TABLE>
Page 34
<PAGE>
PREMIUM PAID ANALYSIS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Dollars
STOCK PRICE PREMIUM ANALYSIS (a) in thousands Notes
- ----------------------------------------------- ------------ ------
<S> <C> <C>
Equity purchase price of Oil $83,673 $3.15 share price x 26,563 shares.
Premium to stock price one day prior 93.8% $1.625 close on April 22, 1998.
Premium to stock price one month prior 101.6%
Premium to stock price three months prior 26.0%
Premium to stock price six months prior 0.8%
PURCHASE PRICE
- ------------------------------------------------
Equity purchase price of heating oil assets $ 41,847 See appendix F, page 40.
Debt assumption value (b) 349,587
--------
Aggregate purchase price of heating oil assets $391,434
========
<CAPTION>
MULTIPLES Notes
- --------------------------------------------- ----------------------- -----------------------------------------------
Multiples
-----------------------
<S> <C> <C>
1997 Revenue $548,141 0.71 x As a multiple of aggregate transaction value.
1997 EBITDA (c) 36,010 10.87 As a multiple of aggregate transaction value.
1997 EBIT (d) 6,264 62.49 As a multiple of aggregate transaction value.
1997 Net loss to common shares (d) ($19,338) NM As a multiple of equity value.
Equity (e) (117,033) NM As a multiple of equity value.
1997 Adjusted EBITDA (c) 43,040 9.09 x As a multiple of aggregate transaction value.
1998 EBITDA budget (c) 43,440 9.01 As a multiple of aggregate transaction value.
Adj. 1998 EBITDA budget (c) 38,500 10.17 As a multiple of aggregate transaction value.
1999P EBITDA (c) 51,657 7.58 As a multiple of aggregate transaction value.
</TABLE>
______________________________________________
(a) Updated through April 22, 1998.
(b) Includes cost of debt at assumed redemption value, preferred stock at
assumed redemption value, transaction fees, and certain off-balance sheet
liabilities, net of excess cash. See appendix F, page 40.
(c) Calculated as gross profit minus SG&A expense and direct delivery expense.
See appendix D, pages 9 through 13.
(d) Excludes restructuring charge, pension curtailment expense, provision for
supplemental benefits and corporate identity expenses.
(e) As of 12/31/97.
Page 35
<PAGE>
MERGERS OF EQUALS PREMIUM ANALYSIS(a)
$100 MILLION AND GREATER
1/1/94 - 4/22/98
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Exchange Exchange
Value of Ratio Ratio
Date Date Transaction Exchange 1 Day 1 Week
Annc'd Effective Target Name Acquiror Name ($ mil) Ratio Prior Prior
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12/23/97 03/27/98 United Meridian Corp Ocean Energy Inc 1,331.7 0.556 0.645 0.565
09/02/97 12/19/97 Doubletree Corp Promus Hotel Corp 2,207.6 1.081 1.288 1.133
08/25/97 12/17/97 Mosinee Paper Corp Wausau Paper Mills Co 497.1 1.400 1.211 1.238
07/10/97 12/31/97 Reading & Bates Corp Falcon Drilling Co 2,587.0 0.590 0.506 0.485
06/30/97 12/23/97 Rykoff-Sexton Inc JP Foodservice Inc 1,404.3 0.840 0.652 0.668
05/27/97 12/18/97 HFS Inc CUC International Inc 11,342.9 2.403 2.268 2.443
05/12/97 09/09/97 Smith's Food & Drug Centers Fred Meyer(Kohlberg Kravis) 2,018.0 1.050 0.955 0.878
05/06/97 07/22/97 BW/IP Inc Durco International Inc 530.7 0.697 0.737 0.657
10/01/96 04/01/97 Health Systems International Foundation Health Corp 1,277.4 0.769 0.838 0.770
08/02/96 11/07/96 Colonial Data Technologies US Order Inc 186.5 1.000 0.792 0.800
07/18/96 02/12/97 ROC Communities Inc Chateau Properties Inc 288.6 1.042 0.984 1.040
04/22/96 08/15/97 NYNEX Corp Bell Atlantic Corp 21,345.5 0.768 0.815 0.835
06/13/95 10/27/95 First Financial Management First Data Corp 5,757.5 1.586 1.349 1.300
03/02/95 06/28/95 Abbey Healthcare Group Inc. Homedco Group Inc. 658.7 0.700 0.641 0.664
08/30/94 03/15/95 Lockheed Corp Martin Marietta Corp 5,204.1 1.630 1.368 1.321
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Exchange Acq/ Acq/ Premium
Ratio Target Target Exchange
Date Date 4 Weeks Equity Total 1 Day
Annc'd Effective Target Name Acquiror Name Prior Mkt Cap Mkt Cap Prior
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12/23/97 03/27/98 United Meridian Corp Ocean Energy Inc 0.557 0.97 1.13 -13.9%
09/02/97 12/19/97 Doubletree Corp Promus Hotel Corp 1.153 1.13 0.96 -16.1%
08/25/97 12/17/97 Mosinee Paper Corp Wausau Paper Mills Co 1.419 1.94 1.88 15.6%
07/10/97 12/31/97 Reading & Bates Corp Falcon Drilling Co 0.535 2.26 2.12 16.5%
06/30/97 12/23/97 Rykoff-Sexton Inc JP Foodservice Inc 0.671 1.19 0.82 28.9%
05/27/97 12/18/97 HFS Inc CUC International Inc 2.765 1.06 0.89 5.9%
05/12/97 09/09/97 Smith's Food & Drug Centers Fred Meyer(Kohlberg Kravis) 0.891 1.92 0.89 9.9%
05/06/97 07/22/97 BWAP Inc Durco International Inc 0.714 1.47 1.32 5.4%
10/01/96 04/01/97 Health Systems International Foundation Health Corp 0.824 1.58 1.28 8.2%
08/02/96 11/07/96 Colonial Data Technologies US Order Inc 0.990 1.28 1.46 26.3%
07/18/96 02/12/97 ROC Communities Inc Chateau Properties Inc 1.039 0.47 0.76 5.9%
04/22/96 08/15/97 NYNEX Corp Bell Atlantic Corp 0.790 1.20 1.04 5.8%
06/13/95 10/27/95 First Financial Management First Data Corp 1.263 1.39 1.39 17.5%
03/02/95 06/28/95 Abbey Healthcare Group Inc. Homedco Group Inc. 0.658 1.59 1.24 9.3%
08/30/94 03/15/95 Lockheed Corp Martin Marietta Corp 1.360 1.16 1.17 19.2%
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Premium Premium
Exchange Exchange
Date Date 1 Week 4 Weeks
Annc'd Effective Target Name Acquiror Name Prior Prior
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12/23/97 03/27/98 United Meridian Corp Ocean Energy Inc -1.7% -0.2%
09/02/97 12/19/97 Doubletree Corp Promus Hotel Corp -4.6% -6.2%
08/25/97 12/17/97 Mosinee Paper Corp Wausau Paper Mills Co 13.1% -1.3%
07/10/97 12/31/97 Reading & Bates Corp Falcon Drilling Co 21.6% 10.3%
06/30/97 12/23/97 Rykoff-Sexton Inc JP Foodservice Inc 25.7% 25.1%
05/27/97 12/18/97 HFS Inc CUC International Inc -1.6% -13.1%
05/12/97 09/09/97 Smith's Food & Drug Centers Fred Meyer(Kohlberg Kravis) 19.6% 17.9%
05/06/97 07/22/97 BWAP Inc Durco International Inc -6.2% 2.4%
10/01/96 04/01/97 Health Systems International Foundation Health Corp 0.1% 6.6%
08/02/96 11/07/96 Colonial Data Technologies US Order Inc 25.0% 1.0%
07/18/96 02/12/97 ROC Communities Inc Chateau Properties Inc 0.2% 0.2%
04/22/96 08/15/97 NYNEX Corp Bell Atlantic Corp 8.0% 2.8%
06/13/95 10/27/95 First Financial Management First Data Corp 22.0% 25.6%
03/02/95 06/28/95 Abbey Healthcare Group Inc. Homedco Group Inc. 5.5% 6.4%
08/30/94 03/15/95 Lockheed Corp Martin Marietta Corp 23.4% 19.9%
</TABLE>
Premium Premium Premium
Exchange Exchange Exchange
1 Day 1 Week 4 Weeks
Prior Prior Prior
- ----------------------------------------------
MEAN 9.6% 10.0% 6.5%
MEDIAN 9.3% 8.0% 2.8%
ADJ. MEAN (B) 10.1% 10.0% 6.5%
- ----------------------------------------------
- --------------------------------------------------------------------------------
(a) "Merger of Equals" is defined as a merger of two companies of similar
market cap size. It does not imply any similarity of business between the
target and acquiror, nor does it imply any change of control of either
company post-merger. Excludes financial institutions.
(b) Adjusted Mean excludes highest and lowest data points
Source: Securities Data Company, Inc. and Bloomberg
Page 36
<PAGE>
Merger of Equals Premium Analysis (a)
[Chart appears here]
------------------
(a) "Merger of Equals" is defined as a merger of two companies of
similar market cap size. It does not imply any similarity
of business between the target and acquiror, nor does it
imply any change of control of either company post-merger.
Excludes financial institutions.
Page 37
<PAGE>
Exchange Ratio Analysis
Relative to current
prices, the exchange Gas Unit Price/Oil Stock Price
ratio at $3.15 is low, 12/15/95 - 4/22/98
however, it is in line
with the average prices
of the companies' equity
over the past two years. [Chart appears here]
Factset: Daily
(a) Represents the current price of Gas divided by
the current price of Oil.
(b) Represents the current price of Gas divided by
the proposed $3.15 price per share of Oil.
(c) Represents Gas' average price for the period
divided by Oil's average price for the period.
Page 38
<PAGE>
Exchange Ratio Analysis
Comparative Stock Price Performance
While Gas' unit price
has remained relatively Indexed Stock Price Performance
flat, Oil's stock price 12/15/95 - 4/22/98
has declined
significantly in the past
year. [Chart appears here]
Premium of Current Price to Price
---------------------------------
Current 2 Years 1 Year 180 Days 60 Days 30 Days
Price (b) Prior Prior Prior Prior Prior
---------------------------------------------------------
Gas 21.94 5.1% 1.4% -2.0% -6.2% -0.3%
Oil 1.63 -76.8% -45.8% -48.1% -35.0% 0.9%
Composite (a) 21.96 -2.2% 6.4% -5.4% -4.4% 1.3%
(a) Composite index includes the following companies: APU, CNO, HPG, FGP,
NPL, SPH.
(b) As of 4/22/98
Page 39
<PAGE>
TRANSACTION MULTIPLE ANALYSIS
FIRM VALUATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Purchase Price of Heating Oil Assets $ 41,847,360
+ Cost of Debt at Redemption Value 290,992,000
+ Cost of Preferred stock at Redemption Value 34,375,000
+ Transaction Fees 17,743,000
349,587,000
+ Off-Balance Sheet Pension and Tax Liability 8,500,000
- Excess Cash
Oil's cash balance at 9/30/98 13,005,000
Required cash on hand (500,000)
"Unearned MQD" (a) (2,497,025)
Additional Surplus (b) (7,984,975) 2,023,000
-------------
Firm Value $ 391,434,360
=============
</TABLE>
________________________________________________________________________________
(a) Comprised of total new units multiplied by the quarterly distribution
payable immediately following the transaction of $0.575 plus the original
units multiplied by the incremental distribution required by the higher
distribution of $0.025, all divided by two for the assumption of a mid-
quarter closing.
(b) Assumes an additional Surplus of $0.95 per new unit is set aside.
<PAGE>
TRANSACTION MULTIPLE ANALYSIS
TRANSACTION MULTIPLES FOR FIRM VALUATION
<TABLE>
<CAPTION>
================================================================================
EBITDA
------------------------------------------
Purchase Price Year Amount Multiple Paid
- -------------- -------------------- ---------------- ----------------
<S> <C> <C> <C>
$391,434,360 1997 Adjusted $43,040,000 9.1x
$391,434,360 Adjusted 1998 Budget $38,500,000 10.2x
$391,434,360 1999 Projected $51,657,000 7.6x
</TABLE>
Page 41
<PAGE>
TRANSACTION MULTIPLE ANALYSIS
DISTRIBUTION OF VALUE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
OIL
1997 Adjusted EBITDA
EBITDA Multiple Purchase Price
- -------------- ---------- ----------------
<S> <C> <C>
$43,040,000 9.1x $391,434,360
</TABLE>
<TABLE>
<CAPTION>
ABILITY TO FURTHER CONSOLIDATE HEATING OIL INDUSTRY CORE BUSINESS
- --------------------------------------------------- -------------
Acquisition EBITDA $ 43,040,000
EBITDA Multiple Purchase Price EBITDA Decline Rate 7.75% (a)
- -------------- ------------- -----------------
<S> <C> <C> <C> <C>
$6,315,789 4.75x $ 30,000,000 WACC 7.85% (b)
Decline Rate 7.75% (a)
WACC 7.85% (b)
Perpetuity $ 40,477,946
Purchase Price $ 30,000,000
--------------
Net Present Value of
the Heating Oil Acq. $ 10,477,946
Value in perpetuity of Ability to
-------------- -------------
Consolidate Heating Oil Industry $133,425,382 Value Of Core Business $275,843,712
============== =============
- ---------------------------------------------------------------------------
Implied Total Valuation $409,269,094
% of Valuation attributable to core business 67.4%
% of Valuation attributable to consolidation opportunities 32.6%
- ---------------------------------------------------------------------------
</TABLE>
(a) A.G. Edwards' estimate of the decline rate of EBITDA based on a 4.1%
attrition rate.
(b) See page 57.
Page 42
<PAGE>
TRANSACTION MULTIPLE ANALYSIS
TRANSACTION MULTIPLES FOR EXISTING HEATING OIL BUSINESS
<TABLE>
<CAPTION>
================================================================================
Revised EBITDA
----------------------------------------
Purchase Price (a) Year Amount Multiple Paid
- ------------------ --------------------- ---------------- -------------
<S> <C> <C> <C>
$263,823,260 1997 Adjusted $43,040,000 6.1x
$263,823,260 Adjusted 1998 Budget $38,500,000 6.9x
$263,823,260 1999 Projected $51,657,000 5.1x
</TABLE>
- --------------------------------------------------------------------------------
(a) Represents A.G. Edwards' estimate of the portion of the $391 million price
being paid for Oil's heating oil business that can be attributable to its
core business. Calculation: $391 million x 67.4%. See page 42.
Page 43
<PAGE>
RELATIVE CONTRIBUTION ANALYSIS (a)
($ IN THOUSANDS)
Gas' EBITDA
Contribution
96-97 35.4% [CHART APPEARS HERE]
98-99 33.3%
96-99 34.3%
For Gas' contribution IMPLIED FIRM VALUE
of approximately 34% APRIL 22, 1998
of the combined entity's
EBITDA, it will receive IMPLIED FIRM VALUE (TRANSACTION)
approximately 37% of the APRIL 22, 1998
implied firm value.
[CHART APPEARS HERE]
__________________
(a) For purposes of its analysis, A.G. Edwards converted Oil's historical
December 31st fiscal year-end to a September 30th fiscal year-end for
comparison purposes. Oil's projections are based on a December 31st
calendar year end. Other measures of relative contribution analysis are
non-meaningful.
(b) Includes only heating oil EBITDA for Oil.
(c) Firm value for all of Oil.
(d) Implied firm value of only Oil's heating oil assets.
Page 44
<PAGE>
ACCRETION/DILUTION ANALYSIS
VARIATIONS IN ATTRITION RATES, MARGIN GROWTH RATES, AND ACQUISITION ASSUMPTIONS
<TABLE>
<CAPTION>
====================================================================================================================================
4.1% Attrition
Gas $0.01 Margin growth Attrition Margin Growth
--------------------- ---------------------
Stand-alone $30.0mm at 4.75x Acquisitions 6.00% 2.00% $0.000 $0.015
------------- ------------------------------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
--------
DCF per unit
1998E (a) $1.270 $1.570 $1.570 $1.570 $1.570 $1.570
1998N (b) 1.930 2.190 2.190 2.190 2.190 2.190
1999P 2.250 3.200 3.080 3.330 2.910 3.350
Accretion/Dilution
1998E (a) 23.6% 23.6% 23.6% 23.6% 23.6%
1998N (b) 13.5% 13.5% 13.5% 13.5% 13.5%
1999P 42.2% 36.9% 48.0% 29.3% 48.9%
Common unit coverage
1998E (a) 0.94x 0.99x 0.99x 0.99x 0.99x 0.99x
1998N (b) 1.42 1.38 1.38 1.38 1.38 1.38
1999P 1.66 1.93 1.86 2.01 1.76 2.02
Total unit coverage
1998E (a) 0.58x 0.71x 0.71x 0.71x 0.71x 0.71x
1998N (b) 0.88 0.99 0.99 0.99 0.99 0.99
1999P 1.02 1.39 1.34 1.45 1.26 1.45
--------
<CAPTION>
4.1% Attrition
Acquisitions $0.015 Margin growth
------------
$50mm at 5.75x $50.0mm at 5.75x Acquisitions
-------------- -------------------------------
<S> <C> <C>
DCF per unit
1998E (a) $1.570 $1.570
1998N (b) 2.190 2.190
1999P 3.480 3.640
Accretion/Dilution
1998E (a) 23.6% 23.6%
1998N (b) 13.5% 13.5%
1999P 54.7% 61.8%
Common unit coverage
1998E (a) 0.99x 0.99x
1998N (b) 1.38 1.38
1999P 2.10 2.20
Total unit coverage
1998E (a) 0.71x 0.71x
1998N (b) 0.99 0.99
1999P 1.51 1.58
- ---------------------------------------------------
(a) 1998 estimate assumes no acquisitions for either company, and is adjusted to
reflect actual results through 3/31/98.
(b) 1998 budgeted.
Page 45
</TABLE>
<PAGE>
PUBLIC COMPANY ANALYSIS
[_] A.G. Edwards compared certain financial and market information of Gas on a
historical and pro forma basis to that of certain public master limited
partnerships which A.G. Edwards deemed relevant for the purposes of this
analysis. A.G. Edwards reviewed the trading multiples from a total of 6
public propane master limited partnerships.
[_] The selected propane master limited partnerships are as follows:
- AmeriGas Partners, L.P. - Heritage Propane Partners, L.P.
- Cornerstone Propane Partners, L.P. - National Propane Partners, L.P.
- Ferrellgas Partners, L.P. - Suburban Propane Partners, L.P.
[_] No company used in the analysis is identical to Gas.
PUBLIC COMPARABLE COMPANIES (A)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
PUBLIC PUBLIC
PRO FORMA COMPANY COMPANY
GAS GAS MEDIANS RANGES
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Yield 10.0% 10.5% 9.6% 8.5% to 10.6%
Firm value/LTM EBITDA 12.7x (b) 10.8x (b) 12.5x 9.8x to 16.7x
Firm value/1998 normalized EBITDA 8.7x (c) 7.9x (c) 11.5x 10.3x to 13.7x
Equity Market Cap/LTM DCF 18.0x (d) 14.0x (d) 15.7x 9.4x to 25.5x
Equity Market Cap/1998 normalized DCF 9.7x (e) 7.5x (e) 13.9x 11.6x to 16.9x
LTM common unit coverage O.9x (f) l.Ox (f) 1.4x 0.6x to 1.5x
1998E common unit coverage 1.7x (g) 1.8x (g) 1.4x 0.9x to 1.9x
LTM total unit coverage 0.6x (h) 0.7x (h) 0.7x 0.4x to l.Ox
1998E total unit coverage l.Ox (i) 1.3x (i) 0.7x 0.7x to l.Ox
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(a) Public comparable companies include: APU, CNO, (f) Adjusted 1998 budget.
FGP, HPG, CNL and SPH. (g) 1999 estimates.
(b) Firm value/adjusted 1998 budget EBITDA. (h) Adjusted 1998 budget.
(c) Firm value/1999 estimated EBITDA. (i) 1999 estimates.
(d) Equity market cap/adjusted 1998 budget EBITDA.
(e) Equity market cap/1999 estimated DCF.
Page 46
<PAGE>
PUBLIC COMPANY ANALYSIS
($ IN MILLIONS, EXCEPT PER UNIT DATA)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Closing Implied Implied Common
Price On Market Value Firm Distribution Units/
Company Ticker (4/22/98) Of Equity Value Per Unit Yield Total Units
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gas (a) $21.938 $ 139.4 $ 232.0 $ 2.20 10.0% 60.3%
AmeriGas Partners, L.P. APU 25.938 1,108.6 1,867.2 2.20 8.5% 52.8%
Cornerstone Propane Partners, L.P. (d) CNO 22.688 455.7 671.7 2.16 9.5% 66.5%
Ferrellgas Partners, L.P. (e) FGP 20.875 666.6 1,192.3 2.00 9.6% 47.0%
Heritage Propane Partners, L.P. HPG 23.125 197.8 371.8 2.00 8.6% 55.8%
National Propane Partners, L.P. NPL 20.313 232.9 375.6 2.10 10.3% 59.6%
Suburban Propane Partners, L.P. (f) SPH 18.813 551.4 942.0 2.00 10.6% 75.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Mean 9.5% 59.5%
Median 9.6% 57.7%
====================================================================================================================================
PRO FORMA $ 21.938 $ 323.9 (g) $ 621.2 (h) $ 2.30 10.5% 70.6%
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
LTM Distributable Cash Flow/ FY98E Distributable Cash Flow/
---------------------------------- --------------------------------
Distribution To Distribution FY98E Distribution To Distribution
Company Common Units To Total Units DCF/Unit Common Units To Total Units
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gas (a) 0.9x (b) 0.6x (b) $2.25 (c) 1.7x (c) 1.0x (c)
AmeriGas Partners, L.P. 1.5x 0.8x 2.14 1.9x 1.0x
Cornerstone Propane Partners, L.P. (d) 0.6x 0.4x 1.47 1.1x 0.7x
Ferrellgas Partners, L.P. (e) 1.4x 0.7x 1.34 1.4x 0.7x
Heritage Propane Partners, L.P. 1.3x 0.8x 2.01 1.8x 1.0x
National Propane Partners, L.P. 0.9x 0.5x 1.60 1.3x 0.8x
Suburban Propane Partners, L.P. (f) 1.4x 1.0x 1.41 0.9x 0.7x
- ------------------------------------------------------------------------------------------------------------------------------------
Mean 1.2x 0.7x 1.4x 0.8x
Median 1.4x 0.7x 1.4x 0.7x
====================================================================================================================================
PRO FORMA 1.0x (b) 0.7x 2.91 (c) 1.8x (c) 1.3x (c)
</TABLE>
____________________________________
1998 estimates per A.G. Edwards' research, except for Gas, Oil, and Pro Forma.
Implied Firm Value equals common, subordinated and GP units, mulitiplied by the
market price of common units plus debt, less cash.
(a) Pro forma for the Pearl Gas acquisition and the common unit offering. Fiscal
1997 maintenance capital expenditure used as LTM figure.
(b) For Gas and Pro forma only, LTM DCF figures are adjusted 1998 budget, DCF
estimates.
(c) For Gas and Pro forma only, FY98E DCF figures are 1999 DCF estimates.
(d) Financial information pro forma for common unit offering. Maintenance
capital expenditures assumed to be 8% of EBITDA due to lack of disclosure.
(e) Maintenance capital expenditure assumed to be 8% of EBITDA due to lack of
disclosure.
(f) Financial figures exclude $5.1 million gain from sale of minority interest.
(g) 14,764 units at $21.9375.
(h) $323.3 in equity plus $308.316 pro forma debt (see page 56), less $10.982
cash.
Page 47
<PAGE>
PUBLIC COMPANY ANALYSIS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Long Term LTM Firm Value/ Firm Value/ Equity Equity
Debt/ EBITDA/ LTM 1998E Market Cap/ Market Cap/
Firm Value Int. Exp. EBITDA EBITDA LTM DCF 1998E DCF
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gas 41.4% 2.3x (a) 12.7x (a) 8.7x (b) 18.0x (c) 9.7x (d)
Amerigas Partners, L.P. 37.3% 2.2x 12.6x 12.1x 15.5x 14.1x
Cornerstone Propane Partners, L.P. 35.1% 2.1x 16.7x 13.7x 25.5x 16.9x
Ferrellgas Partners, L.P. 41.5% 2.1x 12.5x 12.0x 15.8x 15.9x
Heritage Propane Partners, L.P. 46.0% 2.6x 10.9x 10.6x 15.7x 11.6x
National Propane Partners, L.P. 36.8% 3.2x 16.3x 11.0x 18.0x 13.0x
Suburban Propane Partners, L.P. 45.5% 2.9x 9.8x 10.3x 9.4x 13.6x
- -------------------------------------------------------------------------------------------------------------------------
Mean 40.4% 2.5x 13.1x 11.6x 16.6x 14.2x
Median 39.4% 2.4x 12.5x 11.5x 15.7x 13.9x
- -------------------------------------------------------------------------------------------------------------------------
Pro Forma 49.6% 2.1x (a) 10.8x (a) 7.9x (b) 14.0x (c) 7.5x (d)
</TABLE>
- -------------------------------------------------------------
EBITDA is defined as net income (loss) before extraordinary items plus interest,
income taxes, depreciation and amortization, impairment expense, and other non-
recurring and non-operating items.
(a) For Gas and Pro Forma only, LTM EBITDA figures are adjusted 1998 budget
estimates.
(b) For Gas and Pro Forma only, 1998E EBITDA figures are 1999 estimates.
(c) For Gas and Pro Forma only, LTM DCF figures are adjusted 1998 budget DCF
estimates.
(d) For Gas and Pro Forma only, 1998E DCF figures are 1999 DCF estimates.
<PAGE>
PUBLIC COMPANY DESCRIPTIONS
AMERIGAS PARTNERS, LP. AmeriGas Partners operates the largest retail
propane distribution business in the U.S., serving
approximately 968,000 residential, commercial,
industrial, agricultural, and motor-fuel customers
in 45 states. AmeriGas Partners also sells
propane-related supplies and equipment, including
home appliances. The company owns or leases a
fleet of about 385 transport trucks, 680 railroad
tank cars, and 2,300 bobtail and rack trucks. It
also owns or leases propane-storage facilities in
Arizona and Rhode Island. AmeriGas Propane, a
wholly owned subsidiary of UGI Corp., owns 58% of
AmeriGas Partners.
[GRAPH APPEARS HERE]
CORNERSTONE PROPANE Cornerstone Propane Partners, L.P. distributes
PARTNERS, L.P. propane for residential, commercial, industrial,
agricultural and other retail uses; markets and
distributes propane and natural gas liquids;
services propane heating systems and appliances;
and sells propane-related supplies, appliances and
other equipment. It is the fifth largest retail
marketer of propane in the U.S. in terms of
volume. The partnership's operations are
concentrated in the east coast, south-central and
west coast regions of the U.S.
[GRAPH APPEARS HERE]
Page 49
<PAGE>
PUBLIC COMPANY DESCRIPTIONS
(continued)
FERRELLGAS PARTNERS, L.P. Ferrellgas is the second largest U.S. distributor
of propane serving more than 800,000 residential
and commercial customers. The company also engages
in propane/natural gas trading, wholesale propane
marketing, and chemical feedstock marketing. It
markets its products primarily in the Midwest, the
Great Lakes area, and the Southeast. With a
delivery fleet of approximately 4,000 vehicles,
Ferrellgas sells almost 700 million gallons of
fuel annually to its retail customers, which
represents about 8% of all retail propane bought
in the U.S. The company has acquired more than 100
companies in 11 years.
[GRAPH APPEARS HERE]
HERITAGE PROPANE Heritage Propane Partners distributes propane to
PARTNERS, LP. more than 220,000 residential, commercial,
industrial, and agricultural customers. The
propane is used primarily for heating, drying,
cooking, as fuel for engines, as a cutting gas for
mining operations, and for curing tobacco. The
company's retail operations distribute propane to
customers in 23 states in the western,
southeastern, and northeastern U.S. The company
also distributes wholesale propane and sells,
installs, and repairs propane-related equipment.
Heritage has acquired 40 retail propane operations
since 1989, bringing annual propane sales to over
125 million gallons.
[GRAPH APPEARS HERE]
Page 50
<PAGE>
PUBLIC COMPANY DESCRIPTIONS
(continued)
NATIONAL PROPANE National Propane L.P. markets propane on a retail
PARTNERS, L.P. basis to residential, commercial, industrial and
agricultural customers and dealers in 25 states;
and also sells propane-related supplies and
equipment, including home and commercial
appliances. It is the sixth largest retail
marketer of propane in the U.S. in terms of
volume, supplying approximately 250,000 active
retail and wholesale customers in 25 states
through 166 service centers located in 24 states.
Operations are concentrated in the Midwest,
Northeast, Southeast and Southwest regions of the
U.S.
[GRAPH APPEARS HERE]
SUBURBAN PROPANE Suburban Propane Partners markets and distributes
PARTNERS, L.P. propane to residential, commercial, industrial and
agricultural customers through a retail
distribution network consisting of 352 district
locations in 41 states. The company, the third
largest retail marketer of propane in the U.S.,
serves over 730,000 active customers primarily
located in the east and west coast regions of the
country. Suburban Propane also sells, installs and
services equipment related to its propane
distribution business, including heating and
cooking appliances and, at some locations, propane
fuel systems.
[GRAPH APPEARS HERE]
Page 51
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
GAS - STAND ALONE
($ IN THOUSANDS)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT SUMMARY (a): 1998 1999 2000 2001 2002 Terminal
--------- ---------- ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
EBITDA 18,279 26,730 28,541 30,361 32,188
% increase 46.2% 6.8% 6.4% 6.0%
Net income (1,321) 3,691 3,554 3,779 4,198
CASH FLOW SUMMARY:
- ------------------
After-tax EBI 12,805 13,582 14,527 15,474
Depreciation and amortization 13,900 14,934 15,809 16,689
Maintenance capital expenditures (3,274) (3,395) (3,694) (3,816)
Working capital increases (500) (500) (500) (500)
---------- ---------- ---------- ----------
Net operating cash flow (free cash flow) 22,931 24,621 26,142 27,847
--------------
Weighted average cost of capital (b) 7.9%
--------------
--------------
Terminal EBITDA multiple (c) 10.2x
--------------
Discount factor (d) 0.9629 0.8927 0.8276 0.7673 0.7388
Terminal value (e) $328,318
--------------
Present value $329,620 $22,079 $21,979 $21,635 $21,367 $242,560
-------------- ---------- ---------- ---------- ---------- ----------------
Current net debt (f) ($102,956)
--------------
Net present value of equity $226,664
==============
Common units/Total units (g) 60.3%
--------------
Equity value to common units (h) $136,669
--------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on management projections.
(b) Based on comparable companies' WACC. See Weighted Average Cost of Capital
analysis.
(c) Gas' current firm value of $232.0 million/$22.781 million normalized 1998
EBITDA = 10.2x, which represents a multiple of current year normalized
EBITDA.
(d) Discount factor calculated using half-year convention.
(e) Terminal value calculated using EBITDA multiple.
(f) Represents total projected debt less cash as of 9/30/98.
(g) Total units include common, subordinated and GP units.
(h) Current market value of common units is 3,832 units * $21.938 unit price =
$84,065
Page 52
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
GAS - PRO FORMA PAINEWEBBER MODEL (a)
($ IN THOUSANDS)
<TABLE>
<CAPTION>
====================================================================================================================
INCOME STATEMENT SUMMARY (b): 1998 1999 2000 2001 2002 Terminal
- ----------------------------- --------- -------- ------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
EBITDA 57,629 78,887 83,412 87,919 92,408
% increase 36.9% 5.7% 5.4% 5.1%
Net income (11,497) 4,970 2,830 3,156 5,021
CASH FLOW SUMMARY:
- ------------------
After-tax EBI 33,584 33,532 34,781 35,995
Depreciation and amortization 44,778 49,354 52,613 55,888
Maintenance capital expenditures (6,774) (6,895) (7,194) (7,316)
Working capital increases (c) 8,982 (1,000) (1,000) (1,000)
-------- -------- ------- -------
Net operating cash flow (free cash flow) 80,570 74,991 79,200 83,567
---------
Weighted average cost of capital (d) 7.9%
---------
---------
Terminal EBITDA multiple (e) 10.2x
---------
Discount factor (f) 0.9629 0.8928 0.8278 0.7675 0.7390
Terminal value (g) $942,562
---------
Present value $970,827 $77,581 $66,952 $65,561 $64,139 $696,595
--------- -------- -------- ------- ------- ---------
Less net debt (h) ($297,334)
---------
Net present value of equity $673,493
=========
Original common units/Total units (i) 26.0%
---------
Equity value to common units (j) $174,793
---------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Scenario assumes 4.1% steady attrition, 0% margin improvement, and $30
million in acquisitions at 4.75 multiple.
(b) Based on management projections.
(c) A.G Edwards' assumption.
(d) Based on comparable companies' WACC. See Weighted Average Cost of Capital
analysis.
(e) Gas' current firm value of $232.0 million/$22.781 million normalized 1998
EBITDA = 10.2x, which represents a multiple of current year normalized
EBITDA.
(f) Terminal value calculated using half-year convention.
(g) Discount factor calculated using EBITDA multiple.
(h) Represents total proforma projected debt less cash as of 9/30/98.
(i) Total units include common, newly issued common, senior subordinated,
subordinated and GP units.
(j) Current market value of common units is 3,832 units * $21,938 unit
price=$84,065
Page 53
<PAGE>
Capital Structure Analysis
Oil
($ in millions)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
12/31/97 4/22/98
Book Value Coupon Market Price Market Value
------------ -------- -------------- --------------
<S> <C> <C> <C> <C>
Debt:
Credit Agreement
Working Capital facility $3.000 7.75% NA $3.0
Acquisition facility 0.000 7.75% NA 0.0
Notes payable
Notes payable for fuel oil dealer purchases, etc. 16.798 8.0%-10.0% NA 16.8
11.85%, 12.17%, 12.18% Senior Notes 60.000 11.96% NA 60.0
14.1% Subordinated and Senior 8.300 14.10% NA 8.3
10.125% Subordinated 50.000 10.13% 92.13% 46.1
9.375% Subordinated Debentures 75.000 9.38% 87.00% 65.3
12.25% Subordinated Debentures 81.250 12.25% 96.50% 78.4
Total Debt $294.348 $277.8
Effective Cost of Debt 11.0%
Preferred Stock:
Redeemable preferred stock $8.334 14.34% NA 8.3
12.875% Exchangeable preferred stock 30.000 12.88% NA 30.0
Adjustment to balance sheet (1.678) NA (1.7)
Total Preferred Stock $36.7 $36.7
Effective Cost of Preferred Stock 13.2%
Total Debt and Preferred Stock $331.0 $314.5
Effective Cost of Debt and Preferred Stock 11.2%
12/31/97 4/22/98
Shares Out. Market Price Market Value
------------- -------------- --------------
Equity:
Common stock
Class A 23,954,560 $1.625 $38.9
Class B 11,228 17.776 (a) 0.2
Class C 2,597,519 NA (b) 4.2
Total Equity $43.3
Effective Cost of Equity 28.7%
Total Capitalization $357.8
WACC 13.3%
Less: Cash 11.7
Net Capitalization $346.1
Net Market Market Value
% of Ownership Value of Gas of Interest
---------------- -------------- --------------
Less:
Interest in Gas 40.7% $231.959 $94.3
Total Value of Oil Without Interest in Gas $263.5
</TABLE>
- -------------------------
(a) Class B market price is calculated as: $17.50+$0.2763.
(b) Market price is assumed to equal that of the Class A
shares, since the Class C shares do not trade.
Page 54
<PAGE>
Capital Structure Analysis
Gas
($ in millions)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/97 4/22/98
Book Value Coupon Market Price Market Value
---------- ------ --------------- --------------
DEBT:
<S> <C> <C> <C> <C>
Credit Agreement
Working Capital facility $ 0.000 None Not applicable Not applicable
Acquisition facility 0.000 None Not applicable Not applicable
Notes payable
8.04% First Mortgage Notes 85.000 8.04% NA $85.0
7.17% First Mortgage Notes (a) 11.000 7.17% NA 11.0
Total Debt $96.0
Effective Cost Of Debt 7.9%
After-tax Cost Of Debt 5.2%
</TABLE>
<TABLE>
<CAPTION>
12/31/97 4/22/98
Shares Out. Market Price Market Value
----------- ------------ ------------
EQUITY:
<S> <C> <C> <C>
Common units 3,831,727 $21.938 $ 84.1
Subordinated units 2,396,078 NA (b) 52.6
General Partner 2.8 (c)
Total Equity $139.4
Effective cost of equity 9.7%
Total Capitalization $235.4
WACC 7.9%
Less: Cash $ 3.5
Net Capitalization $232.0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The 7.17% First Mortgage Notes were placed 1/26/98; proceeds were used to
repay the acquisition facility.
(b) Market price assumed to equal common units.
(c) Implied 2% general partner interest.
Page 55
<PAGE>
Capital Structure Analysis
Gas - Pro Forma as of 9/30/98
($ In Thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma
Gas Oil Adjustments Gas
------------ ------------ ------------------ -----------
Debt:
<S> <C> <C> <C> <C>
8.04% First Mortgage Notes $85,000 $0 $0 $85,000
8.25% WC Revolver 7,457 - - 7,457
7.17% First Mortgage Notes 11,000 - - 11,000
11.96% Senior Notes - 60,000 (60,000) -
14.10% Senior Notes - 3,100 (3,100) -
14.10% Subordinated Notes - 3,100 (3,100) -
10.13% Sub Notes & Sr Notes - 50,000 (50,000) -
9.38% Sub Notes & Sr Notes - 75,000 (75,000) -
12.25% Sub Notes & Sr Notes - 81,250 (81,250) -
8.00% Existing Acq Notes Payable - 13,859 - 13,859
8.46% Exchange Debt - - 66,000 66,000
8.50% New Debt - - 125,000 125,000
------------ ------------ ------------------ -----------
Total Debt $103,457 $286,309 ($81,450) $308,316
Weighted average cost of Debt 8.3%
Preferred Stock:
14.33% Preferred Stock $0 $4,167 ($4,167) $0
12.88% Preferred Stock - 30,000 (30,000) -
------------ ------------ ------------------ -----------
- 34,167 (34,167) -
Common Equity $56,368 $210,015 $123,378 ($30,268)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 56
<PAGE>
Discounted Cash Flow Analysis
Pro Forma Weighted Average Cost Of Capital Derivation
($ in millions)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Implied Total Total
Market Unit Total Market Debt/ Debt as % Un-
Levered Val. Debt Price at Units Value of Total Of Total levered
Comparable Company Beta (a) (Bk = Mkt) (4/22/98) Out. (Mil) Equity Equity Capital Beta
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriGas Partners, L.P. 0.52 $ 777.8 $ 25.938 41.9 $1,108.6 70.2% 41.2% 0.306
Cornerstone Propane Partners, L.P. 0.41 235.8 22.688 19.7 455.7 51.7% 34.1% 0.270
Ferrellgas Partners, L.P. 0.39 537.2 20.875 31.3 666.6 80.6% 44.6% 0.216
Heritage Propane Partners, L.P. 0.44 176.9 23.125 8.4 197.8 89.4% 47.2% 0.232
National Propane Partners, L.P. 0.34 147.4 20.313 11.2 232.9 63.3% 38.8% 0.208
Star Gas Partners, L.P. 0.34 96.0 21.938 6.2 139.4 68.9% 40.8% 0.201
Suburban Propane Partners, L.P. 0.38 428.2 18.813 28.7 551.4 77.6% 43.7% 0.214
</TABLE>
Comparable group's average unlevered beta: 0.23
Pro forma debt - to - equity ratio (b): 95.2%
Pro forma debt as a percent of total capital (b): 48.8%
Comparable group's beta relevered for Pro forma capital structure: 0.368
=====
- -----------------------------------------------------------------------------
Pro forma capitalization - at market (b) $308.3 48.8%
Total debt 323.9 51.2%
-------- -------
Common Equity $632.2 100.00%
- -----------------------------------------------------------------------------
DERIVATION OF WEIGHTED AVERAGE COST OF CAPITAL :
- -------------------------------------------------
<TABLE>
<CAPTION>
Market Risk Premium Range (d)
-------------------------------------------
<S> <C> <C> <C> <C>
11.3% 12.3% 13.3%
-------------------------------------------
Pro forma theoretical levered beta: 0.368
Assumed % of equity in Pro forma capital structure (b): 51.2%
Risk - free rate of return (c): 5.7%
Pro forma cost of equity range (at various market risk premiums): 9.8% 10.2% 10.6%
===== ===== =====
Pro forma assumed tax rate: 35.0%
Assumed % of debt in capital structure (b): 48.8%
Pro forma estimated cost of debt (e): 8.3%
Pro forma estimated after - tax cost of debt: 5.4% 5.4% 5.4% 5.4%
-------------------------------------------
Pro forma weighted average cost of capital range (f): 7.7% 7.9% 8.0%
-------------------------------------------
</TABLE>
- -----------------------------------------------------
(a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the
number of weeks available, which may be less than 143) adjusted beta
relative to the S&P 500 index.
(b) Market value of long-term debt is assumed to be equal to the book value.
(c) Ten - year Treasury rate on April 22, 1998.
(d) Ibbotson Associates 1997. Total returns for small company stocks of 17.7%
minus the risk-free rate.
(e) Based on Pro forma current debt structure.
(f) Calculation based upon use of the Capital Asset Pricing Model (CAPM).
Page 57
<PAGE>
COMPARISON OF CAPITAL STRUCTURES AND COSTS OF CAPITAL
($ IN MILLIONS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
AMERIGAS PARTNERS, CORNERSTONE PROPANE FERRELLGAS PARTNERS,
L.P. Partners, L.P. L.P.
------------------ ------------------- --------------------
Capital Cost Capital Cost Capital Cost
------- ------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
DEBT:
Working capital/Revolving credit facility $ 28.0 6.44% $ 24.2 7.76% $ 84.6 8.40%
Acquisition facility 37.0 6.32%
Term loan 50.0 8.40%
Senior Notes 100.0 10.13% 220.0 7.53% 200.0 10.00%
160.0 9.38%
First Mortgage Notes
Series A 222.8 10.53%
Series B 211.6 10.07%
Series C 110.0 8.83%
Purchase contract obligations 12.0 7.50%
Notes payable on noncompete agreements 14.6 6.05%
Other, including capital leases 9.4 NA
TOTAL DEBT PER MOST RECENT 10K 718.7 256.2 509.1
TOTAL DEBT 12/31/97 777.8 9.56% 235.8 7.55% 537.2 9.27%
MINORITY INTEREST $ 5.1 $ 0.0 $ 2.0
EQUITY:
TOTAL EQUITY $1,108.6 9.75% $455.7 9.41% $ 666.6 9.93%
TOTAL CAPITALIZATION $1,891.6 8.29% $691.5 7.88% $1,205.8 8.19%
Less: Cash 24.4 19.8 13.5
NET CAPITALIZATION $1,867.2 $671.7 $1,192.3
FINANCIAL RATIOS:
Bank debt/total debt 8.36% 10.26% 25.05%
Total debt/total cap 41.12% 34.10% 44.55%
Common/total units 52.77% 66.48% 46.97%
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
HERITAGE PROPANE NATIONAL PROPANE SUBURBAN PROPANE
Partners, L.P. Partners, L.P. Partners, L.P.
------------------- ------------------ --------------------
Capital Cost Capital Cost Capital Cost
-------- ------ -------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
DEBT:
Working capital/Revolving credit facility $ 12.3 7.59% $ 8.5 7.95% $ 0.0
Acquisition facility 25.0 7.38% 12.0 7.35% $ 0.0
Term loan
Senior Notes 120.0 8.55% 425.0 7.54%
3.5 8.00%
First Mortgage Notes 125.0 8.54%
Series A
Series B
Series C
Purchase contract obligations
Notes payable on noncompete agreements 3.3 8.00% 1.9 8.00%
Other, including capital leases 1.0
TOTAL DEBT PER MOST RECENT 10K 161.5 147.4 428.5
TOTAL DEBT 12/31/97 176.9 8.23% 147.4 8.40% 428.2 7.54%
MINORITY INTEREST $ 0.0 $ 0.0 $ 0.0
EQUITY:
TOTAL EQUITY $197.8 10.10% $ 232.9 9.62% $551.4 9.88%
TOTAL CAPITALIZATION $374.6 7.86% $ 380.2 8.01% $979.6 7.71%
Less: Cash 2.8 4.6 37.6
NET CAPITALIZATION $371.8 $ 375.6 $942.0
FINANCIAL RATIOS:
Bank debt/total debt 21.06% 13.91% 0.00%
Total debt/total cap 47.21% 38.76% 43.71%
Common/total units 55.82% 59.65% 75.06%
</TABLE>
Page 58
<PAGE>
AMERIGAS PARTNERS, L.P.
DISCOUNTED CASH FLOW ANALYSIS
WEIGHTED AVERAGE COST OF CAPITAL DERIVATION
($ in millions)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Implied Total Total
Market Unit Total Market Debt/ Debt as % Un-
Levered Val. Debt Price at Units Value of Total of Total Levered
Comparable Company Beta (a) (Bk = Mkt) (4/22/98) Out. (Mil) Equity Equity Capital Beta
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriGas Partners, L.P. 0.48 $777.8 $ 25.938 41.9 $1,108.6 70.2% 41.2% 0.282
Cornerstone Propane Partners, L.P. 0.40 235.8 22.688 19.7 455.7 51.7% 34.1% 0.264
Ferrellgas Partners, L.P. 0.38 537.2 20.875 31.3 666.6 80.6% 44.6% 0.210
Heritage Propane Partners, L.P. 0.43 176.9 23.125 8.4 197.8 89.4% 47.2% 0.227
National Propane Partners, L.P. 0.34 147.4 20.313 11.2 232.9 63.3% 38.8% 0.208
Star Gas Partners, L.P. 0.33 96.0 21.938 6.2 139.4 68.9% 40.8% 0.195
Suburban Propane Partners, L.P. 0.36 428.2 18.813 28.7 551.4 77.6% 43.7% 0.203
<CAPTION>
Comparable group's average unlevered beta: 0.23 ------------------------------------------------------------
AmeriGas' debt-to-equity ratio(b): 70.2% <S> <C> <C>
AmeriGas' debt as a percent of total capital (b): 41.2% AmeriGas' capitalization-at market (b)
Comparable group's beta relevered for Amerigas' Total debt $777.8 41.2%
capital structure: 0.331 Common equity 1,108.6 58.8%
====== -------- ------
$1,886.5 100.0%
------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Derivation Of Weighted Average Cost Of Capital : Market Risk Premium Range (d)
- ------------------------------------------------ --------------------------------------------
<S> <C> <C> <C> <C>
AmeriGas' theoretical levered beta: 0.331 11.3% 12.3% 13.3%
Assumed % of equity in Amerigas' capital structure (b): 58.8% --------------------------------------------
Risk-free rate of return (c): 5.7%
AmeriGas' cost of equity range (at various market risk premiums): 9.4% 9.7% 10.1%
AmeriGas' assumed tax rate: 35.0% ===== ===== =====
Assumed % of debt in capital structure (b): 41.2%
AmeriGas' estimated cost of debt (e): 9.6%
AmeriGas' estimated after-tax cost of debt: 6.2% 6.2% 6.2% 6.2%
--------------------------------------------
AmeriGas' weighted average cost of capital range (f): 8.1% 8.3% 8.5%
____________________________________________________________ --------------------------------------------
</TABLE>
(a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the
number of weeks available, which may be less than 143) adjusted beta
relative to the S&P 500 index.
(b) Market value of long-term debt is assumed to be equal to the book value.
(c) Ten-year Treasury rate on April 22, 1998.
(d) Ibbotson Associates 1997. Total returns for small company stocks of 17.7%
minus the risk-free rate.
(e) Based on AmeriGas' current debt structure.
(f) Calculation based upon use of the Capital Asset Pricing Model (CAPM).
Page 59
<PAGE>
CORNERSTONE PROPANE PARTNERS, L.P.
DISCOUNTED CASH FLOW ANALYSIS
WEIGHTED AVERAGE COST OF CAPITAL DERIVATION
($ IN MILLIONS)
<TABLE>
<CAPTION>
===============================================================================================================================
Total Implied Total Total
Market Unit Total Market Debt/ Debt as %
Levered Val. Debt Price at Units Value of Total of Total Unlevered
Comparable Company Beta (a) (Bk = Mkt) (4/22/98) Out. (Mil) Equity Equity Capital Beta
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriGas Partners, L.P. 0.48 $777.8 $25.938 41.9 $1,108.6 70.2% 41.2% 0.282
Cornerstone Propane Partners, L.P. 0.40 235.8 22.688 19.7 455.7 51.7% 34.1% 0.264
Ferrellgas Partners, L.P. 0.38 537.2 20.875 31.3 666.6 80.6% 44.6% 0.210
Heritage Propane Partners, L.P. 0.43 176.9 23.125 8.4 197.8 89.4% 47.2% 0.227
National Propane Partners, L.P. 0.34 147.4 20.313 11.2 232.9 63.3% 38.8% 0.208
Star Gas Partners, L.P. 0.33 96.0 21.938 6.2 139.4 68.9% 40.8% 0.195
Suburban Propane Partners, L.P. 0.36 428.2 18.813 28.7 551.4 77.6% 43.7% 0.203
<CAPTION>
--------------------------------------------------
<S> <C> <C>
Cornerstone's capitalization - at market (b)
Comparable group's average unlevered beta: 0.23 Total debt $235.8 34.1%
Cornerstone's debt - to - equity ratio (b): 51.7% Common equity 455.7 65.9%
------ ------
Cornerstone's debt as a percent of total capital (b): 34.1%
Comparable group's beta relevered for Cornerstone's $691.5 100.0%
capital structure: 0.303
===== --------------------------------------------------
<CAPTION>
DERIVATION OF WEIGHTED AVERAGE COST OF CAPITAL: Market Risk Premium Range (d)
- ----------------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C>
11.3% 12.3% 13.3%
------------------------------------------
Cornerstone's theoretical levered beta: 0.303
Assumed % of equity in Cornerstone's capital structure (b): 65.9%
Risk - free rate of return (c): 5.7%
Cornerstone's cost of equity range (at various market risk premiums): 9.1% 9.4% 9.7%
==== ==== ====
Cornerstone's assumed tax rate: 35.0%
Assumed % of debt in capital structure (b): 34.1%
Cornerstone's estimated cost of debt (e): 7.6%
Cornerstone's estimated after - tax cost of debt: 4.9%
4.9% 4.9% 4.9%
Cornerstone's weighted average cost of capital range (f):
------------------------------------------
7.7% 7.9% 8.1%
------------------------------------------
</TABLE>
____________________________
(a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the
number of weeks available, which may be less than 143) adjusted beta
relative to the S&P 500 index.
(b) Market value of long-term debt is assumed to be equal to the book value.
(c) Ten - year Treasury rate on April 22, 1998.
(d) Ibbotson Associates 1997. Total returns for small company stocks of 17.7%
minus the risk-free rate.
(e) Based on Cornerstone's current debt structure.
(f) Calculation based upon use of the Capital Asset Pricing Model (CAPM).
Page 60
<PAGE>
Ferrellgas Partners, L.P.
Discounted Cash Flow Analysis
Weighted Average Cost of Capital Derivation
($ in millions)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total Implied Total Total
Market Unit Total Market Debt/ Debt as % Un-
Levered Val, Debt Price at Units Value of Total Of Total Levered
Comparable Company Beta (a) (Bk = Mkt) (4/22/98) Out. (Mil) Equity Equity Capital Beta
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriGas Partners, L.P. 0.48 $ 777.8 $25.938 41.9 $1,108.6 70.2% 41.2% 0.282
Cornerstone Propane Partners, L.P. 0.40 235.8 22.688 19.7 455.7 51.7% 34.1% 0.264
Ferrellgas Partners, L.P. 0.38 537.2 20.875 31.3 666.6 80.6% 44.6% 0.210
Heritage Propane Partners, L.P. 0.43 176.9 23.125 8.4 197.8 89.4% 47.2% 0.227
National Propane Partners, L.P. 0.34 147.4 20.313 11.2 232.9 63.3% 38.8% 0.208
Star Gas Partners, L.P. 0.33 96.0 21.938 6.2 139.4 68.9% 40.8% 0.195
Suburban Propane Partners, L.P. 0.36 428.2 18.813 28.7 551.4 77.6% 43.7% 0.203
<CAPTION>
---------------------------------------------
Ferrellgas 'capitalization -
at Market (b)
<S> <C> <C> <C> <C>
Comparable group's average unlevered beta: 0.23 Total debt $537.2 44.6%
Ferrellgas' debt - to - equity ratio (b): 80.6% Common equity 666.6 55.4%
Ferrellgas' debt as a percent of total capital (b): 44.6% --------- -------
Comparable group's beta relevered for Ferrell gas' capital structure: 0.346 $1,203.8 100.0%
========= ---------------------------------------------
<CAPTION>
Derivation Of Weighted Average Cost Of Capital : Market Risk Premium Range (d)
- ------------------------------------------------ --------------------------------------
<S> <C> <C> <C> <C>
11.3% 12.3% 13.3%
Ferrellgas' theoretical levered beta: 0.346 --------------------------------------
Assumed % of equity in Ferrell gas' capital structure (b): 55.4%
Risk - free rate of return (c): 5.7%
Ferrellgas' cost of equity range (at various market risk premiums): 9.6% 9.9% 10.3%
Ferrellgas' assumed tax rate: 35.0% ==== ==== =====
Assumed % of debt in capital structure (b): 44.6%
Ferrellgas' estimated cost of debt (e): 9.3%
Ferrellgas' estimated after - tax cost of debt: 6.0% 6.0% 6.0% 6.0%
--------------------------------------
Ferrellgas' weighted average cost of capital range (f): 8.0% 8.2% 8.4%
- ------------------------------------- --------------------------------------
</TABLE>
(a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the
number of weeks available, which may be less than 143) adjusted beta
relative to the S&P 500 index.
(b) Market value of long-term debt is assumed to be equal to the book value.
(c) Ten - year Treasury rate on April 22, 1998.
(d) Ibbotson Associates 1997. Total returns for small company stocks of 17.7%
minus the risk-free rate.
(e) Based on Ferrellgas' current debt structure. 61
(f) Calculation based upon use of the Capital Asset Pricing Model (CAPM).
<PAGE>
HERITAGE PROPANE PARTNERS, L.P.
DISCOUNTED CASH FLOW ANALYSIS
WEIGHTED AVERAGE COST OF CAPITAL DERIVATION
($ IN MILLIONS)
<TABLE>
<CAPTION>
====================================================================================================================================
TotaL Implied Total Total
Market Unit TotaL Market Debt/ Debt as % Un-
Levered Val. Debt Price at Units Value of Total of Total Levered
Comparable Company Beta (a) (Bk = Mkt) (4/22/98) Out. (Mil) Equity Equity Capital Beta
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriGas Partners, L.P. 0.48 $777.8 $25.938 41.9 $1,108.6 70.2% 41.2% 0.282
Cornerstone Propane Partners, L.P. 0.40 235.8 22.688 19.7 455.7 51.7% 34.1% 0.264
Ferrellgas Partners, L.P. 0.38 537.2 20.875 31.3 666.6 80.6% 44.6% 0.210
Heritage Propane Partners, L.P. 0.43 176.9 23.125 8.4 197.8 89.4% 47.2% 0.227
National Propane Partners, L.P. 0.34 147.4 20.313 11.2 232.9 63.3% 38.8% 0.208
Star Gas Partners, L.P. 0.33 96.0 21.938 6.2 139.4 68.9% 40.8% 0.195
Suburban Propane Partners, L.P. 0.36 428.2 18.813 28.7 551.4 77.6% 43.7% 0.203
<CAPTION>
------------------------------------------------
<S> <C> <C>
Heritage's Capitalization - at market (b)
Comparable group's average unlevered beta: 0.23 Total debt $176.9 47.2%
Heritage's debt - to - equity ratio(b): 89.4% Common Equity 197.8 52.8%
------- ------
Heritage's debt as a percent of total capital (b): 47.2% $374.6 100.0%
Comparable group's beta relevered for Heritage's capital structure: 0.359 ------------------------------------------------
=====
<CAPTION>
DERIVATION OF WEIGHTED AVERAGE COST OF CAPITAL : MARKET RISK PREMIUM RANGE (d)
- ------------------------------------------------ ----------------------------------
<S> <C> <C> <C> <C>
11.3% 12.3% 13.3%
----------------------------------
Heritage's theoretical levered beta: 0.359
Assumed % of equity in Heritage's capital structure (b): 52.8%
Risk - free rate of return (c): 5.7%
Heritage's cost of equity range (at various market risk premiums): 9.7% 10.1% 10.5%
==== ===== =====
Heritage's assumed tax rate: 35.0%
Assumed % of debt in capital structure (b): 47.2%
Heritage's estimated cost of debt (e): 8.2%
Heritage's estimated after - tax cost of debt: 5.4% 5.4% 5.4% 5.4%
----------------------------------
Heritage's weighted average cost of capital range (f): 7.7% 7.9% 8.0%
----------------------------------
</TABLE>
__________________________________________________________
(a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the
number of weeks available, which may be less than 143) adjusted beta
relative to the S&P 500 index.
(b) Market value of long-term debt is assumed to be equal to the book value.
(c) Ten - year Treasury rate on April 22, 1998.
(d) Ibbotson Associates 1997. Total returns for small company stocks of 17.7%
minus the risk-free rate.
(e) Based on Heritage's current debt structure.
(f) Calculation based upon use of the Capital Asset Pricing Model (CAPM).
Page 62
<PAGE>
National Propane Partners,L.P.
Discounted Cash Flow Analysis
Weighted Average Cost of Capital Derivation
($ in millions)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Implied Total Total
Market Unit Total Market Debt/ Debt as % Un-
Levered Val.Debt Price at Units Value of Total of Total levered
Comparable Company Beta (a) (Bk = Mkt) (4/22/98) Out. (Mil) Equity Equity Capital Beta
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriGas Partners, L.P. 0.48 $777.8 $ 25.938 41.9 $1,108.6 70.2% 41.2% 0.282
Cornerstone Propane Partners, L.P. 0.40 235.8 22.688 19.7 455.7 51.7% 34.1% 0.264
Ferrellgas Partners, L.P. 0.38 537.2 20.875 31.3 666.6 80.6% 44.6% 0.210
Heritage Propane Partners, L.P. 0.43 176.9 23.125 8.4 197.8 89.4% 47.2% 0.227
National Propane Partners, L.P. 0.34 147.4 20.313 11.2 232.9 63.3% 38.8% 0.208
Star Gas Partners, L.P. 0.33 96.0 21.938 6.2 139.4 68.9% 40.8% 0.195
Suburban Propane Partners, L.P. 0.36 428.2 18.813 28.7 551.4 77.6% 43.7% 0.203
--------------------------------------------------------
National's capitalization - at market (b)
Comparable group's average unlevered beta: 0.23 Total debt $147.4 38.8%
National's debt - to - equity ratio (b): 63.3% Common equity 232.9 61.2
------ -----
National's debt as a percent of total capital (b): 38.8% $380.2 100.0%
--------------------------------------------------------
Comparable group's beta relevered for National's capital structure: 0.320
=====
Derivation of Weighted Average Cost of Capital: Market Risk Premium Range (d)
- ------------------------------------------------ ---------------------------------
11.3% 12.3% 13.3%
---------------------------------
National's theoretical levered beta: 0.320
Assumed % of equity in National's capital structure (b): 61.2%
Risk - free rate of return (c): 5.7%
National's cost of equity range (at various market risk premiums): 9.3% 9.6% 9.9%
=== === ===
National's assumed tax rate: 35.0%
Assumed % of debt in capital structure (b): 38.8%
National's estimated cost of debt (e): 8.4%
National's estimated after - tax cost of debt: 5.5% 5.5% 5.5% 5.5%
---------------------------------
National's weighted average cost of capital range (f): 7.8% 8.0% 8.2%
---------------------------------
</TABLE>
______________________________
(a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the
number of weeks available, which may be less than 143) adjusted beta
relative to the S&P 500 index.
(b) Market value of long-term debt is assumed to be equal to the book value.
(c) Ten - year Treasury rate on April 22, 1998.
(d) lbbotson Associates 1997. Total returns for small company stocks of 17.7%
minus the risk-free rate.
(e) Based on National's current debt structure.
(f) Calculation based upon use of the Capital Asset Pricing Model (CAPM).
Page 63
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P.
DISCOUNTED CASH FLOW ANALYSIS
WEIGHTED AVERAGE COST OF CAPITAL DERIVATION
($ IN MILLIONS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL IMPLIED TOTAL TOTAL
MARKET UNIT TOTAL MARKET DEBT/ DEBT AS % UN-
LEVERED VAL. DEBT PRICE AT UNITS VALUE OF TOTAL OF TOTAL LEVERED
COMPARABLE COMPANY BETA (A) (BK = MKT) (4/22/98) OUT. (IL) EQUITY EQUITY CAPITAL BETA
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriGas Partners, L.P. 0.48 $777.8 $ 25.938 41.9 $1,108.6 70.2% 41.2% 0.282
Cornerstone Propane Partners, L.P. 0.40 235.8 22.688 19.7 455.7 51.7% 34.1% 0.264
Ferrellgas Partners, L.P. 0.38 537.2 20.875 31.3 666.6 80.6% 44.6% 0.210
Heritage Propane Partners, L.P. 0.43 176.9 23.125 8.4 197.8 89.4% 47.2% 0.227
National Propane Partners, L.P. 0.34 147.4 20.313 11.2 232.9 63.3% 38.8% 0.208
Star Gas Partners, L.P. 0.33 96.0 21.938 6.2 139.4 68.9% 40.8% 0.195
Suburban Propane Partners, L.P. 0.36 428.2 18.813 28.7 551.4 77.6% 43.7% 0.203
-------------------------------------------------------
Suburban's capitalization - at market (d)
Comparable group's average unlevered beta: 0.23 Total debt $428.2 43.7%
Suburban's debt - to - equity ratio (b): 77.6% Common equity 551.4 56.3%
------ -----
Suburban's debt as a percent of total capital (b): 43.7% $979.6 100.0%
-------------------------------------------------------
Comparable group's beta relevered for Suburban's capital structure: 0.342
=====
DERIVATION OF WEIGHTED AVERAGE COST OF CAPITAL : MARKET RISK PREMIUM RANGE (d)
- ------------------------------------------------ ----------------------------------
11.3% 12.3% 13.3%
----------------------------------
Suburban's theoretical levered beta: 0.342
Assumed % of equity in Suburban's capital structure (b): 56.3%
Risk - free rate of return (c): 5.7%
Suburban's cost of equity range (at various market risk premiums): 9.5% 9.9% 10.2%
==== ==== =====
Suburban's assumed tax rate: 35.0%
Assumed % of debt in capital structure (b): 43.7%
Suburban's estimated cost of debt (e): 7.5%
Suburban's estimated after - tax cost of debt: 4.9% 4.9% 4.9% 4.9%
----------------------------------
Suburban's weighted average cost of capital range (f): 7.5% 7.7% 7.9%
----------------------------------
</TABLE>
__________________________________
(a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the
number of weeks available, which may be less than 143) adjusted beta
relative to the S&P 500 index.
(b) Market value of long-term debt is assumed to be equal to the book value.
(c) Ten - year Treasury rate on April 22, 1998.
(d) Ibbotson Associates 1997. Total returns for small company stocks of 17.7%
minus the risk-free rate.
(e) Based on Suburban's current debt structure.
(f) Calculation based upon use of the Capital Asset Pricing Model (CAPM).
Page 64
<PAGE>
<TABLE>
<CAPTION>
PROJECT HEAT
- ------------------------------------------------------------------------------------------------------------------------------------
Transaction Summary and Assumptions
(in thousands except per share and per unit data) Scenario III: Worst Case
EQUITY RESTRUCTURING CALCULATION OF SUB GP UNITS OFFERED
- -------------------------------------------------------------------------- -------------------------------------------------
Petro
-----------------------
Public Insiders
-------- ---------
<S> <C> <C> <C> <C>
Securities Offered Sr Sub Sub & GP Value of Sub/GP Units to be
Incentive Rights 76% 24% To be Coverial $18,597
Value Offered $ 3.15 $ 3.15 Less: Value of GP 6,284
-------------
Current Market $ 1.63 $ 1.63 12,313
Premium in Market 93.8% 98.6% Remaider at $16.33 754
Required Yeild w/out PV of Incentive Rights 11.5% 14.0%
Value of Security w/out PV of Incent. Rights $ 19.13 $ 15.71
Assumed Value of Incentive Rights $ 0.61 $ 0.61
Value of Security Offered $ 19.74 $ 16.33 PRESENT VALUE OF INCENTIVE RIGHTS
Security Offered per Share 0.16 0.19 Discount Rate 25%
Total Shares 17,160 9,404 PV of Cash Flows 1997-2005 1,478
Insiders to Receive Sr.Sub 3,500 (3,500) PV of Terminal Value 4x 1,189
-------------
Shares to be Converted 20,660 5,904 Total PV of Incentive Rights 2,667
Units Offered 3,296 754
Current Sub/GP 0 Value of Incentive Rights
Value of GP/Unit $ 21.28 per Ut $ 0.61
</TABLE>
<TABLE>
<CAPTION>
DEBT RESTRUCTURING
- ------------------------------------------------------------------------------------------------------------------------------------
Projected
12/31/97
Privates Principal Strategy Price
----------- ---------- -------
<S> <C> <C> <C>
11.96% Sr Notes 60,000 Exchange 110.0%
14.10% Sr Notes 3,100 Neg.Tender 110.0%
14.10% Sub Notes 3,100 Neg.Tender 110.0%
14.33% Pfd Stock 4,167 Neg.Tender 105.0%
Publics:
10.13% Sub Notes & Sr Notes 50,000 Neg.Tender 100.0%
9.38% Sub Notes & Sr Notes 75,000 Tender 100.0%
12.25% Sub Notes & Sr Notes 81,250 Tender 105.0%
12.88% Pfd Stock 30,000 Tender 100.0%
</TABLE>
<TABLE>
<CAPTION>
FINANCING SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------------
Amount Rate Unit Price
---------- -------- --------------
<S> <C> <C> <C>
New Common Raised $145,728 $ 22.13
New Debt Raised 125,000 8.50%
</TABLE>
<TABLE>
<CAPTION>
UNITS OUTSTANDING
- ------------------------------------------------------------------------------------------------------------------------------------
Current Pro Forma
-------------------- ----------------------
Units % Units %
-------- ------- -------- ---------
<S> <C> <C> <C> <C>
Existing Common 3,832 60.3% 3,832 26.0%
New Common 0 0.0% 6,587 44.6%
Common to Petro Shareholders 0 0.0% 0 0.0%
Sr Sub to Petro Shareholders 0 0.0% 3,296 22.3%
Existing Sub 2,396 37.7% 754 5.1%
Implied GP 127 2.0% 295 2.0%
-------- ------- -------- ---------
Total Units 6,355 100.0% 14,764 100.0%
-------- ------- -------- ---------
</TABLE>
<TABLE>
<CAPTION>
SUMMARY CASH FLOW AND COVERAGE ANALYSIS
- ------------------------------------------------------------------------------------------------------------------------------------
($ on per Unit data)
Estimated Normalized Projected
----------------------------------------------
1998 1998 1999 2000 2001 2002
-------- --------- -------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
STAR STAND ALONE
EBITDA $18,629 $ 22,781 $26,730 $ 28,541 $ 30,361 $ 32,188
Interest Expense (7,807) (7,807) (9,114) (10,028) (10,748) (11,276)
Maintenance CapEx (2,710) (2,710) (3,274) (3,395) (3,694) (3,816)
Taxes (25) (25) (25) (25) (25) (25)
-------- --------- -------- --------- --------- ----------
Distributable Cash Flow $ 8,087 $ 12,239 $14,317 $ 15,093 $ 15,894 $ 17,071
======== ========= ======== ========= ========= ==========
DCF per common Unit $ 2.11 $ 3.19 $ 3.74 $ 3.94 $ 4.15 $ 4.46
DCF/Common Unit MQD 0.94 x 1.42 x 1.66 x 1.75 x 1.85 x 1.98
DCF per Total Unit $ 1.27 $ 1.93 $ 2.25 $ 2.38 $ 2.50 $ 2.69
DCF/Total MQD 0.58 x 0.88 x 1.02 x 1.08 x 1.14 x 1.22
Indicated Distribution per Common Unit $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20
Star Pro Forma
EBITDA
Star $18,629 $ 22,781 $26,730 $ 28,541 $ 30,361 $ 32,188
Petro 38,500 43,440 51,657 54,371 57,058 59,720
Synergies 500 500 500 500 500 500
-------- --------- -------- --------- --------- ----------
Total 57,629 66,721 78,887 $ 83,412 87,919 92,408
-------- --------- -------- --------- --------- ----------
Interest Expense (27,697) (27,697) (28,649) (30,737) (31,660) (31,009)
Maintenance CapEx (6,210) (6,210) (6,774) (6,895) (7,194) (7,316)
Taxes (525) (525) (525) (525) (525) (525)
-------- --------- -------- --------- --------- ----------
Distributable Cash Flow $23,197 $ 32,289 $42,939 $ 45,255 $ 48,540 $ 53,558
======== ========= ======== ========= ========= ==========
DCF per Common Unit $ 2.23 $ 3.10 $ 4.12 $ 4.34 $ 4.66 $ 5.14
DCF per Total Unit 1.57 2.19 2.91 3.07 3.29 3.63
Indicated Distribution per Common Unit $ 2.20 $ 2.20 $ 2.30 $ 2.40 $ 2.60 $ 2.80
Pro Forma Coverage Ratios
MQD Coverage
Common Unit 0.99 x 1.38 x 1.84 x 1.93 x 2.08 x 2.29 x
Senior Subordinated Unit 0.75 1.05 1.39 1.47 1.58 1.74
Total Unit 0.71 0.99 1.32 1.39 1.49 1.65
Indicated Distribution Coverage
Common Unit 0.99 x 1.38 x 1.76 x 1.77 x 1.76 x 1.80 x
Senior Subordinated Units 0.75 1.05 1.33 1.35 1.33 1.37
Total Unit 0.71 0.99 1.26 1.28 1.26 1.30
Aceration/Dilution
DCF per Unit - Star Stand Alone $ 1.27 $ 1.93 $ 2.25 $ 2.38 $ 2.50 $ 2.69
DCF per Unit - Pro Forma 1.57 2.19 2.91 3.07 3.29 3.63
Pro Forma Credit Analysis
EBITDA Interest 2.08 x 2.41 x 2.75 x 2.71 x 2.78 x 2.98 x
LT Debt/EBITDA 5.22 4.51 4.17 4.32 4.01 3.71
</TABLE>
<PAGE>
PROJECT
- --------------------------------------------------------------------------------
TRANSACTION SUMMARY AND ASSUMPTIONS
(in thousands except per share and per unit
<TABLE>
<CAPTION>
OPERATING ASSUMPTIONS
- -------------------------------------------------------
Petro Star
-------- ------
<S> <C> <C>
Normalized Maintenance CapEx $3,500 $2,710
Maintenance CapEx Life 15 yrs 15 yrs
Growth CapEx Life 15 yrs 15 yrs
Life of Existing Depreciation 15 yrs 15 yrs
Interest Income Rate 3.5% 3.5%
Marginal Tax Percent 30.0% 33.0%
Deferred Tax Percent 0.0%
Minimum Cash Balance $1,000
Initial Incremental Cash Req'd for
Distributions $5,000
Consolidation Savings $500
Annual Bank Fees $692 $94
Current Stock Price $1.63 $22.13
</TABLE>
<TABLE>
<CAPTION>
ACQUISITION ASSUMPTIONS
------------------------------------------------------------------
Petro Multiple 1998 1999 2000 2001 2002
----- ---------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Amount 4.75x $15,000 $30,000 $30,000 $30,000 $30,000
Timing End Mid Mid Mid Mid
% EBITDA 0.0% 50.0% 50.0% 50.0% 50.0%
% Attrition 4.1%
Star
Amount 7.00x $20,000 $10,000 $10,000 $10,000 $10,000
Timing End Mid Mid Mid Mid
0.0% 50.0% 50.0% 50.0% 50.0%
% EBITDA
Amount 7.00x $5,000
Timing Reg
% EBITDA 100.0%
</TABLE>
<TABLE>
<CAPTION>
NEW SECURITY ASSUMPTIONS
- -------------------------------------------------------------------------------------------------------------------
New MLP Equity New Star Debt Advisory Fees
- -------------------------------------- -------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C>
Gross Proceeds $145,728 Gross Proceeds $125,000 Fairness Opinion $1,000
Common Units to Public 6,587 Gross Spread % 1.0% Financial Advisory $2,500
Gross Spread % 5.0% Gross Spread $ $ 1,250 Debt Tender Fee 0.26% $ 507
Gross Spread $ $ 7,286 Coupon 8.50%
Offering Price/Share $ 22.13
(current market price)
</TABLE>
<TABLE>
<CAPTION>
EXCHANGE ASSUMPTIONS
- ------------------------------------------------------------------------------
Gets New Units of:
----------------------------
Shareholders of: Dividend Common 5x Sub Sub
- ---------------------------------------------- -------- --------- -------
<S> <C> <C> <C> <C> <C>
Public Class A Shares 17,160 $0.30 - 2,738 -
Insider Class A Shares 6,795 $0.30 - - 754
Insider Class B Shares 11 $0.30 - 2 -
Insider Class C Shares 2,598 $0.30 - 556 -
------- -------- --------- -------
26,563 - 3,296 754
</TABLE>
<TABLE>
<CAPTION>
TRANSACTION COSTS SUMMARY SOURCES AND USES OF FUNDS
- ------------------------------------------------------------ ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
New MLP Equity $ 7,286 Sources $ 2,023 Uses:
New Star Debt 1,250 Excess Cash on Hand 125,000 Repay Debt Principal $212,450
Fairness Opinion 1,000 New Star Debt 145,728 Redeem Preferred 34,167
Financial Advisory 2,500 New MLP Equity 0 Premium on Redemption/
Solicitation Fees on Exchange of Outsider Petro Cash Balance Exchange/Defeasance 4,891
Debt 507
Exchange of 11.96% Notes 300 Transaction Fees 17,743
Prefunding of Liabilities 3,500
Legal Fees 1,000 --------- ---------
$272,751 $272,751
Printing 2,500 ========= =========
Accounting Fees 250
Other:
Environmetal 350
Rating Agencies 100
Roadshow 200
Asset Appraisal 250
Solicitation expenses 100
Other Bank Fees 150
--------
$17,743
========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRANSACTION SUMMARY AND ASSUMPTION
(in thousands except per share and per unit data) Scenario III: Worst Case
RECAPITALIZATION ASSUMPTIONS
- -----------------------------------------------------------------------------------------------------------------------------
(D)efease
(T)ender
(R)edeem Principal
(E)xchange as of Maturity Period Coupon/ Sinking Fund Payment
------------------- ------------------------
Petro Instruments: (N)othing 9/30/98 m/d yr Dividend Payment Year Start
- ---------------------------- -------------- ------------ --------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
11.96% Sr Notes e $ 60,000 v 1-Oct 0 11.960% $ 0 0
14.10% Sr Notes t 3,100 v 15-Jan 2001 14.100% 1,050 1997
14.10% Sub Notes t 3,100 v 15-Jan 2001 14.100% 1,050 1997
10.13% Sub Notes & Sr Notes t 50,000 v 1-Apr 2003 10.110% -
9.38% Sub Notes & Sr Notes t 75,000 v 1-Feb 2006 9.375% -
12.25% Sub Notes & Sr Notes t 81,250 v 1-Feb 2005 12.250% -
8.00% Acq. & Other Notes Payable n 13,859 v 0 8.000% - 0
8.25% Existing Credit Facility n 0 v 1998 8.250% -
0.00% Other Notes n 0 v NA NA 0.000% 0 NA
------------
$286,309
Pfrd Stock:
- -----------
14.33% Pfd Stock t 4,167 v 1-Aug 1999 14.330% 4,167 1997
12.88% Pfd Stock t 30,000 v 15-Feb 2009 12.875% 0
0.00% n 0 0.000%
------------
$ 34,167
------------
Total Petro $320,476
------------
Star Instruments:
- ----------------------------
8.04% 1st Mortgage Notes n 85,000 v NA NA 8.040% - 0
8.25% WC Revolver n 0 NA NA 8.250% - NA
7.50% Acquisition Facility n 0 v NA NA 7.500% - NA
8.50% New Debt n 125,000 v NA NA 8.500% 0 NA
7.17% Pearl Notes n 11,000 NA NA 7.170% 0 NA
------------
$210,000
------------
Total Combined $530,476
============
<CAPTION>
% Red/ Red/Exchg Defeasance Red/Exchg/Defease Exchanged
-------------------
Petro Instruments: Exchanged Price Price Value Premium Int Rate Security Type
- ---------------------------- ----------- ----------- ---------- --------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
11.96% Sr Notes 100.0% 110.0% $66,000 $ 0 8.5% Sr Notes
14.10% Sr Notes 100.0% 110.0% 3,410 310 Sr Notes
14.10% Sub Notes 100.0% 110.0% 3,410 310 Sub Notes
10.13% Sub Notes & Sr Notes 100.0% 100.0% 106.2% 50,000 - Sub Notes & Sr Notes
9.38% Sub Notes & Sr Notes 100.0% 100.0% 108.2% 75,000 - Sub Notes & Sr Notes
12.25% Sub Notes & Sr Notes 100.0% 105.0% 116.2% 85,313 4,063 Sub Notes & Sr Notes
8.00% Acq. & Other Notes Payable 0.0% 100.0% - - Acq. & Other Notes Payable
8.25% Existing Credit Facility 0.0% 100.0% - - Existing Credit Facility
0.00% Other Notes 0.0% 0.0% - - 11.0% Other Notes
---------
$ 4,683
Pfrd Stock:
- -----------
14.33% Pfd Stock 100.0% 105.0% 4,375 208 Pfd Stock
12.88% Pfd Stock 100.0% 100.0% 30,000 - Pfd Stock
0.00% - -
---------
$ 208
---------
Total Petro $ 4,891
---------
Star Instruments:
- ----------------------------
8.04% 1st Mortgage Notes 0.0% 0.0% - - 1st Mortgage Notes
8.25% WC Revolver 0.0% 0.0% - - WC Revolver
7.50% Acquisition Facility 0.0% 0.0% - - Acquisition Facility
8.50% New Debt 0.0% 0.0% - - Now Debt
7.17% Pearl Notes 0.0% 0.0% - - Pearl Notes
---------
$ 0
---------
Total Combined $ 4,891
---------
</TABLE>
Star Stand Alone Distribution Assumptions
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Marginal Interest In:
------------------------
Distribution Public GP
------------ ------ --------
<S> <C> <C> <C>
Minimum Quarterly Distribution $2.20 98% 2%
First Target Distribution $2.42 98% 2%
Second Target Distribution $2.84 85% 15%
Third Target Distribution $3.70 75% 25%
Thereafter NM 50% 50%
Target Distribution Level $2.20
Annual Distribution Increase $0.00
Standard Distribution Structure ("S") ------------
or Target ("T") t
------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Marginal Interest In Incentive Rights
------------------------ ------------------------
Distribution Public GP Incen. Rt. GP Sr. Sub.
------------ ------ -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Minimum Quarterly Distribution $2.20 98% 2% 0% 24% 76%
First Target Distribution $2.42 98% 2% 0% 24% 76%
Second Target Distribution $2.84 85% 2% 13% 24% 76%
Third Target Distribution $3.70 75% 2% 23% 24% 76%
Thereafter NM 50% 2% 48% 24% 76%
1998 1999 2000 2001 2002 Thereafter
------------ ------ -------- ---------- ---------- ------------
Annual Indicated Distribution Increase $0.00 $0.10 $0.10 $0.20 $0.20 $0.05
Target Indicated Distribution Level $2.20 $2.30 $2.40 $2.60 $2.80
Standard Distribution Structure ("S") ------------
or Target ("T") t
------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
3 of 18
<PAGE>
PROJECT HEAT
================================================================================
PRO FORMA OPENING BALANCE SHEET
(in thousands except per share and per unit data) SCENARIO III: WORST CASE
<TABLE>
<CAPTION>
OPENING BALANCE SHEET STAR GAS PETRO
------------------------------------- -------------------------------------
12/31/97 ADJUSTMENTS 9/30/98 12/31/97 ADJUSTMENTS 9/30/98
---------- ------------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Cash $ 3,452 ($ 2,951) $ 501 $ 2,390 $10,615 $ 13,005
Other Current Assets 18,537 (3,142) 15,395 102,734 (43,030) 59,704
---------- ---------- ---------- ----------
Total Current Assets 21,989 15,895 105,124 72,709
PP&E and Intangibles, Net 108,809 (3,995) 104,814 124,804 - 107,763
Investments in Unconsolidated Affiliates - - - 7,535 (7,122) 413
Other Assets 48,653 (2,115) 46,338 10,385 (19) 10,364
---------- ---------- ---------- ----------
Total Assets 179,451 167,248 247,846 191,269
========== ========== ========== ==========
Liabilities:
Current Liabilities 11,514 (4,143) 7,371 92,688 - 70,110
8.25% Existing Credit Facility - 7,457 7,457 21,500 (21,500) -
Long Term Debt 96,000 - 96,000 278,378 7,931 286,309
Total Preferred Stock - - - 34,167 - 34,167
Other Liabilities 54 (3) 51 10,745 (47) 10,698
---------- ---------- ---------- ----------
Total Liabilities 107,568 110,879 437,478 401,284
Common Shareholder's/Partner's Equity 71,883 (15,515) 56,368 (189,632) (20,383) (210,015)
---------- ---------- ---------- ----------
Total Liabilities and Equity $179,451 $167,248 $247,846 $191,269
========== ========== ========== ==========
check - - -
<CAPTION>
PRO FORMA
MERGER STAR GAS
ADJUSTMENTS 9/30/98
----------- -----------
<S> <C> <C>
ASSETS:
Cash ($ 2,023) $ 10,982
Other Current Assets - 75,099
----------- -----------
Total Current Assets (2,023) 86,081
PP&E and Intangibles, Net - 212,597
Investments in Unconsolidated Affiliates (413) -
Other Assets - 56,902
----------- -----------
Total Assets (2,436) 355,580
LIABILITIES:
Current Liabilities - 77,481
8.25% Existing Credit Facility - 7,437
Long Term Debt (81,450) 300,859
Total Preferred Stock (34,167) -
Other Liabilities (10,698) 51
----------- -----------
Total Liabilities (126,315) 385,848
Common Shareholder's/Partner's Equity 123,378 (30,268)
----------- -----------
Total Liabilities and Equity ($ 2,937) $355,580
===========
check - -
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA CAPITAL STRUCTURE STAR GAS PETRO
------------------------------------- -------------------------------------
12/31/97 ADJUSTMENTS 9/30/98 12/31/97 ADJUSTMENTS 9/30/98
---------- ------------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Debt:
8.04% 1st Mortgage Notes $ 85,000 $ 85,000 $ 0 $ 0 $ 0
8.25% WC Revolver - 7,437 7,457 - - -
7.50% Acquisition Facility - - - - -
7.17% Pearl Notes 11,000 11,000 - - -
11.96% Sr Notes - - 60,000 - 60,000
14.10% Sr Notes - - 4,150 (1,050) 3,100
14.10% Sub Notes - - 4,150 (1,050) 3,100
10.13% Sub Notes & Sr Notes - - 50,000 - 50,000
9.38% Sub Notes & Sr Notes - - 75,000 - 75,000
12.25% Sub Notes & Sr Notes - - 81,250 - 81,250
0.00% Other Notes - - 0 - 0
8.00% Arg. & Other Notes Payable - - 16,798 (2,939) 13,859
8.25% Existing Credit Facility - - 0 - 0
8.46% Exchanged Debt - - - - -
8.50% New Debt - - - - -
---------- ---------- ---------- ----------
Total Debt 96,000 103,457 291,348 286,309
---------- ---------- ---------- ----------
Preferred Stock:
14.33% Pfd Stock - - 4,167 - 4,167
12.88% Pfd Stock - - 30,000 - 30,000
---------- ---------- ---------- ----------
Total Preferred - - 34,167 34,167
---------- ---------- ---------- ----------
Common Shareholder's/Partner's Equity 71,883 56,368 (189,632) (20,383) (210,015)
---------- ---------- ---------- ----------
Total Capital $167,883 $159,825 $135,883 $110,461
========== ========== ========== ==========
<CAPTION>
PRO FORMA
MERGER STAR GAS
ADJUSTMENTS 9/30/98
----------- -----------
<S> <C> <C> <C>
Debt:
8.04% 1st Mortgage Notes $ 0 $ 85,000
8.25% WC Revolver - 7,457
7.50% Acquisition Facility - -
7.17% Pearl Notes - 11,000
11.96% Sr Notes (60,000) -
14.10% Sr Notes (3,100) -
14.10% Sub Notes (3,100) -
10.13% Sub Notes & Sr Notes (50,000) -
9.38% Sub Notes & Sr Notes (75,000) -
12.25% Sub Notes & Sr Notes (81,250) -
0.00% Other Notes - -
8.00% Arg. & Other Notes Payable - 13,859
8.25% Existing Credit Facility - -
8.46% Exchanged Debt 66,000 66,000
8.50% New Debt 125,000 125,000
Total Debt (81,450) 308,316 (123,543.00)
-----------
Preferred Stock:
14.33% Pfd Stock (4,167) -
12.88% Pfd Stock (30,000) -
----------- -----------
Total Preferred (34,167) -
-----------
Common Shareholder's/Partner's Equity 123,378 (30,268)
-----------
Total Capital $278,048
===========
</TABLE>
4 of 18
<PAGE>
<TABLE>
<CAPTION>
PROJECT HEAT
====================================================================================================================================
(In thousands except per share and per unit data)
SCENARIO III: WORST CASE
STAR GAS STAND ALONE INCOME STATEMENT
Estimated Normalized Projected
----------------------------------------------------------------------
1998 1998 1999 2000 2001 2002 2003 2004 2005
--------- -------- --------- --------- --------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EBITDA $18,629 $22,781 $26,730 $28,541 $30,361 $32,188 $34,125 $36,178 $38,356
Depreciation and Amortization 11,629 11,629 12,768 15,111 16,137 17,178 18,229 19,291 20,364
--------- -------- --------- --------- --------- -------- -------- ------- -------
EBIT 7,000 11,152 13,962 13,430 14,224 15,010 15,896 16,887 17,992
Interest Expense (7,807) (7,807) (9,114) (10,028) (10,748) (11,276) (9,858) (10,217) (10,452)
Interest Income 18 18 35 35 35 35 35 35 35
Other Income - - - - - - - - -
--------- -------- --------- --------- --------- -------- -------- ------- -------
Income Before Taxes (789) 3,363 4,883 3,437 3,511 3,769 6,073 6,705 7,575
Current Income Taxes (25) (25) (25) (25) (25) (25) (25) (25) (25)
Deferred Income Taxes - - - - - - - - -
--------- ------- --------- --------- --------- -------- -------- -------- -------
Net Income Available To Common ($814) $3,338 $4,858 $3,412 $3,486 $3,744 $6,048 $6,680 $7,550
========== ======= ========= ========= ======== ======== ======== ======= =======
STAR GAS STAND ALONE UNITS OUTSTANDING
Common Units
Beginning Balance 3,832 3,832 3,832 4,317 4,317 4,517 4,717 4,717 4,717
Issuance 0 0 485 0 200 200 0 0 0
Buyback 0 0 0 0 0 0 0 0 0
---------- ------- --------- --------- -------- -------- -------- -------- -------
Ending Balance 3,832 3,832 4,317 4,317 4,517 4,717 4,717 4,717 4,717
---------- ------- --------- --------- -------- -------- -------- -------- -------
Subordinated Units
Beginning Balance 2,396 2,396 2,396 2,396 2,396 2,396 2,396 2,396 2,396
Issuance 0 0 0 0 0 0 0 0 0
Buyback 0 0 0 0 0 0 0 0 0
---------- ------- --------- --------- -------- -------- -------- ------- -------
Ending Balance 2,396 2,396 2,396 2,396 2,396 2,396 2,396 2,396 2,396
---------- ------- --------- --------- -------- -------- -------- ------- -------
GP Implied Units
Beginning Balance 127 127 127 127 127 127 127 127 127
Issuance 0 0 0 0 0 0 0 0 0
Buyback 0 0 0 0 0 0 0 0 0
---------- ------- --------- --------- -------- -------- -------- ------- -------
Ending Balance 127 127 127 127 127 127 127 127 127
---------- ------- --------- --------- -------- -------- -------- ------- -------
Total Units 6,355 6,355 6,840 6,840 7,040 7,240 7,240 7,240 7,240
========== ======= ========= ========= ======== ======== ======== ======= =======
</TABLE>
5 of 18
<PAGE>
PROJECT HEAT
================================================================================
(in thousands except per share and per unit data)
<TABLE>
<CAPTION>
Scenario III: Worst Case Estimated Projected
---------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STAR GAS STAND ALONE BALANCE SHEET
Assets:
Cash $ 501 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000
Other Current Assets 15,395 18,600 19,317 20,037 20,760 21,526 22,339 23,200
-------- -------- -------- -------- -------- -------- -------- --------
Total Current Assets 15,895 19,600 20,317 21,037 21,760 22,526 23,339 24,200
PP&E and Intangibles, Net 104,814 112,117 112,225 111,632 110,148 107,768 104,484 100,291
Other Assets 46,538 46,538 46,538 46,538 46,538 46,538 46,538 46,538
-------- -------- -------- -------- -------- -------- -------- --------
Total Assets 167,248 178,255 179,080 179,207 178,446 176,832 174,361 171,029
======== ======== ======== ======== ======== ======== ======== ========
Liabilities:
Current Liabilities 7,371 10,576 11,293 12,013 12,736 13,502 14,315 15,176
Total Debt 103,457 109,651 120,328 125,805 130,133 135,685 139,702 141,910
Other Liabilities 51 51 51 51 51 51 51 51
-------- -------- -------- -------- -------- -------- -------- --------
Total Liabilities 110,879 120,279 131,672 137,869 102,920 149,239 154,068 157,167
Partner's Equity 56,368 57,976 47,407 41,338 35,526 27,593 20,293 13,862
-------- -------- -------- -------- -------- -------- -------- --------
Total Liabilities and Equity $167,248 $178,255 $179,080 $179,207 $178,446 $176,832 $174,361 $171,029
======== ======== ======== ======== ======== ======== ======== ========
Check - - - - - - - -
STAR GAS STAND ALONE CASH FLOW STATEMENT
Net Income $ 4,858 $ 3,412 $ 3,486 $ 3,744 $ 6,048 $ 6,680 $ 7,550
Depreciation and Amortization 12,768 15,111 16,137 17,178 18,229 19,291 20,364
Deferred Taxes - - - - - - -
Other Income - - - - - - -
Other Asset/Liabilities - - - - - - -
Change in Working Capital (0) - (0) (0) 0 (0) (0)
-------- -------- -------- -------- -------- -------- --------
Cash from Operations 17,626 18,523 19,623 20,922 24,277 25,971 27,914
-------- -------- -------- -------- -------- -------- --------
Maintenance CapEx (3,274) (3,395) (3,694) (3,816) (3,942) (4,072) (4,206)
Internal Growth CapEx (1,797) (1,824) (1,850) (1,878) (1,906) (1,935) (1,965)
External Growth CapEx (15,000) (10,000) (10,000) (10,000) (10,000) (10,000) (10,000)
-------- -------- -------- -------- -------- -------- --------
Cash from Investments (20,071) (15,219) (15,544) (15,694) (15,848) (16,007) (16,171)
-------- -------- -------- -------- -------- -------- --------
Acquisition Borrowing 16,797 11,824 11,850 11,878 11,906 11,935 11,965
Remaining Distributions to Repay Debt (336) (1,112) (1,913) (3,090) (6,319) (7,884) (9,692)
Amortization of Mortgage Notes - - - - - - -
Borrowing to Repay Existing Debt - - - - - - -
Borrowing for Changes in WC 0 - 0 0 (0) 0 0
Borrowing to Pay Full MQD - - - - - - -
Change in Equity 10,731 - 4,425 4,425 - - -
Distributions (13,981) (13,981) (13,981) (13,981) (13,981) (13,981) (13,981)
-------- -------- -------- -------- -------- -------- --------
Cash from Financing 13,211 (3,269) 381 (768) (8,393) (9,929) (11,708)
-------- -------- -------- -------- -------- -------- --------
Net Cash Flow 10,766 35 4,460 4,460 35 35 35
Initial Cash Balance 501 1,000 1,000 1,000 1,000 1,000 1,000
-------- -------- -------- -------- -------- -------- --------
Cash Available for Paydown of WC Revolver and Acq. Facility 11,266 1,035 5,460 5,460 1,035 1,035 1,035
Minimum Cash Balance 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Borrowing/(Paydown) on WC Revolver and Acq. Facility (10,266) (35) (4,460) (4,460) (35) (35) (35)
-------- -------- -------- -------- -------- -------- --------
Net Change in Cash 499 - - - - - -
-------- -------- -------- -------- -------- -------- --------
Ending Cash Balance $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000
======== ======== ======== ======== ======== ======== ========
</TABLE>
6 of 18
<PAGE>
<TABLE>
<CAPTION>
PROJECT HEAT
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands except per share and per unit data)
Scenario III: Worst Case
Estimated Normalized Projected
-------------------------------------------------------------
1998 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Star Gas Stand Alone EBITDA Calculation
(see Tab 3; cases)
- ------------------------------------------------------------------------------------------------------------------------------------
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
EBITDA Growth Rate 22.3% 1.7% 1.7% 1.7% 1.7% 1.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Base EBITDA: Timing
End 1998
Mid 1999
Mid 2000
Mid 2001
Mid 2002
Mid 2003
Mid 2004
Mid 2005
------- ------- ------- ------- ------- ------- ---------
Total EBITDA $18,629 $22,781 $26,730 $28,541 $30,361 $32,188 $34,125
======= ======= ======= ======= ======= ======= =========
Star Gas Stand Alone Depreciation Calculation
Existing Depreciation $11,629 $11,629 $11,629 $11,629 $11,629 $11,629 $ 11,629
Maintenance CapEx: 1998 2,710 $0 $0 $ 181 $ 181 $ 181 $ 181 $ 181
Annual Growth: 3.3% 1999 3,274 109 218 218 218 218
2000 3,395 113 226 226 226
2001 3,694 123 246 246
2002 3,816 127 254
2003 3,942 131
2004 4,072
2005 4,206
Internal Growth CapEx: 1998 1,841 - - 123 123 123 123 123
Annual Growth: 1.5% 1999 1,797 60 120 120 120 120
2000 1,824 61 122 122 122
2001 1,850 63 123 123
2002 1,878 63 125
2003 1,906 64
2004 1,935
2005 1,965
External Growth CapEx: 1998 20,000 - - - 1,333 1,333 1,333 1,333
Annual Growth 0.0% 1999 15,000 667 1,000 1,000 1,000 1,000
2000 10,000 333 667 667 667
2001 10,000 333 667 667
2002 10,000 333 667
2003 10,000 333
2004 10,000
2005 10,000
------- ------- ------- ------- ------- ------- --------
Total Depreciation $11,629 $11,629 $12,768 $15,111 $16,137 $17,178 $ 18,229
======= ======= ======= ======= ======= ======= ========
<CAPTION>
PROJECT HEAT
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands except per share and per unit data)
Scenario III: Worst Case
Estimated Normalized Projected
---------------------------------------------------------
2004 2005
-------- --------
<S> <C> <C>
Star Gas Stand Alone EBITDA Calculation
(see Tab 3; cases)
- ------------------------------------------------------------------------------------------------------------------------------------
EBITDA Growth Rate Year 7 Year 8
1.7% 1.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Base EBITDA: Timing
End 1998
Mid 1999
Mid 2000
Mid 2001
Mid 2002
Mid 2003
Mid 2004
Mid 2005 -------- --------
$36,178 $38,356
======== ========
Total EBITDA
Star Gas Stand Alone Depreciation Calculation
Building Depreciation $11,629 $11,629
Maintenance CapEx: 1998 2,710 $ 181 $ 181
Annual Growth: 3.3% 1999 3,274 218 218
2000 3,395 226 226
2001 3,694 246 246
2002 3,816 254 254
2003 3,942 263 263
2004 4,072 136 271
2005 4,206 140
Internal Growth CapEx: 1998 1,841 123 123
Annual Growth: 1.5% 1999 1,797 120 120
2000 1,824 122 122
2001 1,850 123 123
2002 1,878 125 125
2003 1,906 127 127
2004 1,935 65 129
2005 1,965 65
`
External Growth CapEx: 1998 20,000 1,333 1,333
Annual Growth 0.0% 1999 15,000 1,000 1,000
2000 10,000 667 667
2001 10,000 667 667
2002 10,000 667 667
2003 10,000 667 667
2004 10,000 333 667
2005 10,000 333
------- -------
Total Depreciation $19,291 $20,364
======== =======
</TABLE>
7 of 18
<PAGE>
<TABLE>
<CAPTION>
Project Heat
- -----------------------------------------------------------------------------------------------------------------------------------
Star Gas Stand Alone Debt Schedule
(In thousands except per share and per unit share) Scenario III: Worst Case
Estimated Normalized Projected
-----------------------------------------
1998 1998 1999 2000 2001 2002
-------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
8.04% 1st Mortgage Notes
Beginning Balance $85,000 $85,000 $85,000 $85,000 $85,000 $85,000
Borrowing 0 0 0 0 0 0
Amortization 0 0 0 0 0 0
--------- --------- ---------- --------- ---------- ----------
Ending Balance 85,000 85,000 85,000 85,000 85,000 85,000
Interest Payment 8.04% 6,834 6,134 6,834 6,834 6,834 6,834
Make-Whole Payment 0 0 0 0 0 0
7.17% Pearl Notes
Beginning Balance $0 $0 $11,000 $11,000 $11,000 $11,000
Borrowing 11,000 11,000 0 0 0 0
Amortization 0 0 0 0 0 0
--------- --------- ---------- --------- ---------- ----------
Ending Balance 11,000 11,000 11,000 11,000 11,000 11.000
Interest Payment 7.17% 613 613 789 789 789 789
% of year Pearl Notes Outstanding 77.7% 77.7% 0 0 0 0
8.25% WC Revolver
Beginning Balance - - $7,457 $7,457 $7,457 $7,457
Borrowing for Change in WC - - 0 0 0 0
Borrowing to Pay Full MQD 5,894 1,742 - - - -
Borrowing/(Payment) 1,563 5,715 0 0 0 0
--------- --------- ---------- --------- ---------- ----------
Ending Balance 7,457 7,457 7,457 7,457 7,457 7,457
Effective Avg WC Balance 3,729 3,729 3,729 3,729 3,729 3,729
Interest Payment 8.25% 308 308 308 308 308 308
7.50% Acquisition Facility
Beginning Balance - - $0 $ 6,194 $16,871 $22,348
External Acquisitions 20,000 20,000 10,000 10,000 10,000 10,000
External Acquisitions at Beginning of 1999 - - 5,000 - - -
Internal Acquisitions 1,841 1,841 1,797 1,824 1,850 1,878
Borrowings to Repay Existing Debt - - - - - -
Payment - - (10,266) (35) (4,460) (4,460)
Remaining Distributions to Repay Debt - - (336) (1,112) (1,913) (3,090)
--------- --------- ---------- --------- ---------- ----------
Ending Balance 0 0 6,194 16,871 22,348 26,676
Interest Payment 7.50% 69 69 420 865 1,471 1,838
Total Debt
Beginning Balance $85,000 $85,000 $103,457 $109,651 $120,328 $125,805
Amortization of Mortgage Notes - - - - - -
Borrowing for Pearl Notes 11,000 11,000 - - - -
Borrowing for Changes in WC - - 0 - 0 0
Borrowing to Pay Full MQD 5,894 1,742 - - - -
Acquisition Borrowing 21,841 21,841 16,797 11,824 11,850 11,878
Borrowing to Repay Existing Debt - - - - - -
Remaining Distributions to Repay Debt - - (336) (1,112) (1,913) (3,090)
Borrowing/(Payment) on WC Revolver and
Acq. Facility 1,563 5,715 (10,266) (35) (4,460) (4,460)
--------- --------- ---------- --------- ---------- ----------
Ending Balance $125,298 $125,298 $109,651 $120,328 $125,805 $130,133
========= ========= ========== ========= ========== ==========
Interest Expense
Interest Expense $7,824 $7,824 $8,350 $8,795 $9,401 $9,769
Bank Fee 94 94 94 94 94 94
--------- ------ -- ------ - --------- ------- ---------
Total Interest Payment $7,807 $7,807 $9,114 $10,028 $10,748 $11,276
======== ======== ======== ========== ========= ==========
<CAPTION>
2003 2004 2005
---------- ---------- ----------
<S> <C> <C> <C>
8.04% 1st Mortgage Notes
Beginning Balance $85,000 $85,000 $85,000
Borrowing 0 0 0
Amortization 0 0 0
--------- --------- ----------
Ending Balance 85,000 85,000 85,000
Interest Payment 6,834 6,834 6,834
Make-Whole Payment 0 0 0
7.17% Pearl Notes
Beginning Balance $11,000 $11,000 $11,000
Borrowing 0 0 0
Amortization 0 0 0
--------- --------- ----------
Ending Balance 11,000 11,000 11,000
Interest Payment 789 789 789
% of year Pearl Notes Outstanding 0 0 0
8.25% WC Revolver
Beginning Balance $7,457 $7,457 $7,457
Borrowing for Change in WC (0) 0 0
Borrowing to Pay Full MQD - - -
Borrowing(Payment) 0 0 0
--------- --------- ----------
Ending Balance 7,457 7,457 7,457
Effective Avg WC Balance 3,729 3,729 3,729
Interest Payment 308 308 308
7.50% Acquisition Facility
Beginning Balance $26,676 $32,228 $36,245
External Acquisitions 10,000 10,000 10,000
External Acquisitions at Beginning of 1999 - - -
Internal Acquisitions 1,906 1,935 1,965
Borrowings to Repay Existing Debt - - -
Payment (35) (35) (35)
Remaining Distributions to Repay Debt (6,319) (7,884) (9,692)
--------- --------- ----------
Ending Balance 32,228 36,245 38,483
Interest Payment 1,834 2,193 2,427
Total Debt
Beginning Balance $130,133 $135,685 $139,702
Amortization of Mortgage Notes
- - -
Borrowing for Pearl Notes - - -
Borrowing for Changes in WC (0) 0 0
Borrowing to Pay Full MQD - - -
Acquisition Borrowing 11,906 11,935 11,965
Borrowing to Repay Existing Debt - - -
Remaining Distributions to Repay Debt (6,319) (7,884) (9,692)
Borrowing/(Payment) on WC Revolver and
Acq. Facility (35) (35) (35)
--------- --------- ----------
Ending Balance $135,685 $139,702 $141,940
========= ========= ==========
Interest Expense
Interest Expense $9,764 $10,123 $10,358
Bank Fee 94 94 94
--------- --------- ----------
Total Interest Payment $9,858 $10,217 $10,452
========= ========= ==========
</TABLE>
PAINEWEBBER INCORPORATED For discussion purposes only
8 of 18
<PAGE>
<TABLE>
<CAPTION>
PROJECT HEAT
====================================================================================================================================
STAR GAS STAND ALONE SCHEDULE OF ACTUAL DISTRIBUTIONS Scenario III: Worst Case
(in thousands except per share and per unit data)
Estimated Normalized Projected
---------------------------------------------------
ASSUMES REVISED TARGET DISTRIBUTION STRUCTURE 1998 1998 1999 2000 2001 2002 2003
---------- ---------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Distributable Cash
- ------------------
Cash from Operations $10,815 $14,967 $17,626 $18,523 $19,623 $20,922 $24,277
Maintenance CapEx (2,710) (2,710) (3,274) (3,395) (3,694) (3,816) (3,942)
Other (18) (18) (35) (35) (35) (35) (35)
---------- ----------- --------- --------- --------- --------- ----------
Total MLP Distributable Cash Flow 8,087 12,239 14,317 15,093 15,894 17,071 20,300
Distributable Cash Flow/Unit $ 1.27 $ 1.93 $ 2.25 $ 2.38 $ 2.50 $ 2.69 $ 3.19
Structure
- ---------
Common Unit Ending Balance 3,832 3,832 3,832 3,832 3,832 3,832 3,832
Subordinated Units 2,396 2,396 2,396 2,396 2,396 2,396 2,396
General Partner Interest Unit Equivalent 127 127 127 127 127 127 127
---------- ----------- --------- --------- --------- --------- ----------
Total Units Outstanding 6,355 6,355 6,355 6,355 6,355 6,355 6,355
Distribution Levels
- -------------------
MQD $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20
First Target $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42
Second Target $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84
Third Target $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70
Indicated Cash Distribution $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20
Distribution of MQD
- -------------------
Cash Available 8,087 12,239 14,317 15,093 15,394 17,071 20,300
Cash Borrowed to Pay Full MQD 5,894 1,742 0 0 0 0 0
Allocation to:
Common Units 8,430 8,430 8,430 8,430 8,430 8,430 8,430
Subordinated Units 5,271 5,271 5,271 5,271 5,271 5,271 5,271
General Partner Interest 280 280 280 280 280 280 280
First Target Distribution
- -------------------------
Cash Available 0 0 336 1,112 1,913 3,090 6,319
Cash Required for Target Distribution 0 0 1,398 1,398 1,398 1,398 1,398
Cash Required for Indicated Distribution 0 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0 0
Second Target Distribution
- --------------------------
Cash Available 0 0 0 0 0 0 0
Cash Required for Target Distribution 0 0 0 0 0 0 0
Cash Required for Indicated Distribution 0 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0 0
Incentive Distribution 0 0 0 0 0 0 0
Third Target Distribution
- -------------------------
Cash Available 0 0 0 0 0 0 0
Cash Required for Target Distribution 0 0 0 0 0 0 0
Cash Required for Indicated Distribution 0 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0 0
Incentive Distribution
<CAPTION>
Projected
------------------------------
Assumes Revised Target Distribution Structure 2004 2005
------------ --------------
<S> <C> <C>
Distributable Cash
- ------------------
Cash from Operations $25,971 $27,914
Maintenance CapEx (4,072) (4,206)
Other (35) (35)
---------- -----------
Total MLP Distributable Cash Flow 21,864 23,673
Distributable Cash Flow/Unit $3.44 $ 3.73
Structure
- ---------
Common Unit Ending Balance 3,832 3,832
Subordinated Units 2,396 2,396
General Partner Interest limit Equivalent 127 127
---------- -----------
Total Units Outstanding 6,355 6,355
Distribution Levels
- -------------------
MQD $ 2.20 $ 2.20
First Target $ 2.42 $ 2.42
Second Target $ 2.84 $ 2.84
Third Target $ 3.70 $ 3.70
Indicated Cash Distribution $ 2.20 $ 2.20
Distribution of MQD
- -------------------
Cash Available 21,864 23,673
Cash Borrowed to Pay Full MQD 0 0
Allocation to:
Common Units 8,430 8,430
Subordinated Units 5,271 5,271
General Partner Interest 280 280
First Target Distribution
- -------------------------
Cash Available 7,884 9,692
Cash Required for Target Distribution 1,398 1,398
Cash Required for Indicated Distribution 0 0
Actual Cash Distributed 0 0
Allocation to:
Common Units 0 0
Subordinated Units 0 0
General Partner Interest 0 0
Second Target Distribution
- --------------------------
Cash Available 0 0
Cash Required for Target Distribution 0 0
Cash Required for Indicated Distribution 0 0
Actual Cash Distributed 0 0
Allocation to:
Common Units 0 0
Subordinated Units 0 0
General Partner Interest 0 0
Incentive Distribution 0 0
Third Target Distribution
- -------------------------
Cash Available 0 0
Cash Required for Target Distribution 0 0
Cash Required for Indicated Distribution 0 0
Actual Cash Distributed 0 0
Allocation to:
Common Units 0 0
Subordinated Units 0 0
General Partner Interest 0 0
Incentive Distribution 0 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT HEAT
====================================================================================================================================
STAR GAS STAND ALONE SCHEDULE OF ACTUAL DISTRIBUTIONS (CONT'D) SCENARIO III: WORST CASE
(in thousands except per share and per unit data)
ESTIMATED NORMALIZED PROJECTED
--------------------------------------------------------------------
1998 1998 1999 2000 2001 2002 2003 2004 2005
--------- ---------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C>
Remaining Distribution
- ----------------------
Cash Available 0 0 0 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0 0 0 0
Incentive Distribution 0 0 0 0 0 0 0 0 0
Repay Indebtedness 0 0 336 1,112 1,913 3,090 6,319 7,884 9,692
Total Distributions
- -------------------
Common Units 8,430 8,430 8,430 8,430 8,430 8,430 8,430 8,430 8,430
Subordinated Units 5,271 5,271 5,271 5,271 5,271 5,271 5,271 5,271 5,271
General Partner Interest 280 280 280 280 280 280 280 280 280
Incentive Distributions 0 0 0 0 0 0 0 0 0
--------- ---------- -------- -------- -------- -------- -------- -------- --------
Total Distributions $13,981 $13,981 $13,981 $13,981 $13,981 $13,981 $13,981 $13,981 $13,981
========= ========== ======== ======== ======== ======== ======== ======== ========
Total Distributions Per Unit
- ----------------------------
Common Unit $2.20 $2.20 $2.20 $2.20 $2.20 $2.20 $2.20 $2.20 $2.20
Subordinated Unit 2.20 2.20 2.20 2.20 2.20 2.20 2.20 2.20 2.20
GP Unit 2.20 2.20 2.20 2.20 2.20 2.20 2.20 2.20 2.20
</TABLE>
10 of 18
<PAGE>
<TABLE>
<CAPTION>
PROJECT HEAT
- -----------------------------------------------------------------------------
(in thousands except per share and per unit data) Scenario III: Worst Case
Projected
Estimated Normalized ______________________________________________________________
1998 1998 1999 2000 2001 2002 2003 2004 2005
-----------------------------------------------------------------------------------
Petro EBITDA Calculation
- ---------------------------------------------------------------------------------------------------------------------------------
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
EBITDA Growth Rate (4.1)% (4.1)% (4.1)% (4.1)% (4.1)% (4.1)% (4.1)% (4.1)%
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Base EBITDA: Timing
Acquisitions: End 1998 $15,000
Mid 1999 30,000
Mid 2000 30,000
Mid 2001 30,000
Mid 2002 30,000
Mid 2003 30,000
Mid 2004 30,000
Mid 2005 30,000
------- -------- -------- ------- ------- ------- ------- ------- -------
Total EBITDA $38,500 $43.440 $51,657 $54,371 $57,058 $59,720 $62,506 $65,422 $68,475
======= ======== ======== ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Petro Depreciation Calculation
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Existing Depreciation $29,660 $29,660 $29,660 $29,660 $29,660 $29,660 $29,660 $29,660 $29,660
Maintenance CapEx: 1998 $3,500 - - 233 233 233 233 233 233 233
Annual Growth:0.0% 1999 3,500 117 233 233 233 233 233 233
2000 3,500 117 233 233 233 233 233
2001 3,500 117 233 233 233 233
2002 3,500 117 233 233 233
2003 3,500 117 233 233
2004 3,500 117 233
2005 3,500 117
Internal Growth CapEx: 1998 $0 - - - - - - - - -
Annual Growth: 0.0% 1999 0 - - - - - - -
2000 0 - - - - - -
2001 0 - - - - -
2002 0 - - - -
2003 0 - - -
2004 0 - -
2005 0 -
External Growth CapEx: 1998 $15,000 - - 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Annual Growth: 0.0% 1999 30,000 1,000 2,000 2,000 2,000 2,000 2,000 2,000
2000 30,000 1,000 2,000 2,000 2,000 2,000 2,000
2001 30,000 1,000 2,000 2,000 2,000 2,000
2002 30,000 1,000 2,000 2,000 2,000
2003 30,000 1,000 2,000 2,000
2004 30,000 1,000 2,000
2005 30,000 1,000
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Depreciation $29,660 $29,660 $32,010 $34,243 $36,477 $38,710 $40,943 $43,177 $45,410
======= ======= ======= ======= ======= ======= ======= ======= =======
PaineWebber Incorporated 11 of 18 For Discussion Purposes Only
</TABLE>
<PAGE>
Project Heat
- --------------------------------------------------------------------------------
(in thousands except per share and per unit data)
Scenario III: Worst Case
Star Pro Forma Income Statement
<TABLE>
<CAPTION>
Projected
Estimated Normalized ----------------------------------------------------------------------
1998 1998 1999 2000 2001 2002 2003 2004 2005
--------- ---------- ------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Combined EBITDA $57,129 $66,221 $78,387 $82,912 $87,419 $91,908 $96,631 $101,601 $106,830
Consolidated Savings 500 500 500 500 500 500 500 500 500
------- ------- ------- ------- ------- ------- -------- -------- --------
Pro Forma EBITDA 57,629 66,721 78,887 83,412 87,919 92,408 97,131 102,101 107,330
Depreciation and Amortization 41,289 41,289 44,778 49,354 52,613 55,888 59,173 62,468 65,774
------- ------- ------- ------- ------- ------- -------- -------- --------
EBIT 16,340 25,432 34,109 34,058 35,306 36,520 37,959 39,633 41,556
Interest Expense (27,697) (27,697) (28,649) (30,737) (31,660) (31,009) (30,126) (28,881) -
Interest Income 384 384 35 35 35 35 35 35 35
Other Income - - - - - - - - -
EBT (10,972) (1,880) 5,495 3,355 3,681 5,546 7,867 10,787 41,591
------- ------- ------- ------- ------- ------- -------- -------- --------
Current Income Tax (525) (525) (525) (525) (525) (525) (525) 525) (525)
Deferred Income Taxes - - - - - - - - -
------- ------- ------- ------- ------- ------- -------- -------- --------
Net Income Available to Common ($11,497) ($ 2,405) $ 4,970 $ 2,830 $ 3,156 $ 5,021 $ 7,342 $ 10,262 $ 41,066
======= ======= ======= ======= ======= ======= ======== ======== ========
Star Pro Forma Units Outstanding
Common Units
Beginning Balance 10,418 10,418 10,418 10,418 10,418 10,418 10,418 10,418
Issuance - - - - - - - -
Buyback - - - - - - - -
------- ------- ------- ------- ------- -------- -------- --------
Ending Balance 10,418 10,418 10,418 10,418 10,418 10,418 10,418 10,418 10,418
SR Subordinated Units
Beginning Balance - 3,296 3,296 3,296 3,296 3,296 3,296 3,296 3,296
Issuance - - - - - - - -
Buyback - - - - - - - -
------- ------- ------- ------- ------- -------- -------- --------
Ending Balance 3,296 3,296 3,296 3,296 3,296 3,296 3,296 3,296 3,296
Subordinated Units
Beginning Balance 754 754 754 754 754 754 754 754
Issuance - - - - - - - -
Buyback - - - - - - - -
------- ------- ------- ------- ------- -------- -------- --------
Ending Balance 754 754 754 754 754 754 754 754 754
GP Implied Units
Beginning Balance 295 295 295 295 295 295 295 295
Issuance - - - - - - - -
Buyback - - - - - - - -
------- ------- ------- ------- ------- -------- -------- --------
Ending Balance 295 295 295 295 295 295 295 295 295
------- ------- ------- ------- ------- ------- -------- -------- --------
Total 14,764 14,764 14,764 14,764 14,764 14,764 14,764 14,764 14,764
======= ======= ======= ======= ======= ======= ======== ======== ========
</TABLE>
PaineWebber Incorporated 12 of 18 For Discussion Purposes Only
<PAGE>
Project Heat
- --------------------------------------------------------------------------------
(in thousands except per share and per unit data)
<TABLE>
<CAPTION>
Star Pro Forma Balance Sheet Scenario III: Worst Case
Projected
Estimated --------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Cash $ 10,982 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000
Other Current Assets 75,099 103,680 109,763 115,823 121,858 128,209 134,890 141,921
-------- -------- -------- -------- -------- -------- -------- --------
Total Current Assets 86,081 104,680 110,763 116,823 122,858 129,209 135,890 142,921
PP&E and Intangibles, Net 212,597 221,390 220,754 217,185 210,491 200,667 187,707 171,604
Other Assets 56,902 56,902 56,902 56,902 56,902 56,902 56,902 56,902
-------- -------- -------- -------- -------- -------- -------- --------
Total Assets 355,580 382,972 388,420 390,910 390,252 386,778 380,499 371,427
======== ======== ======== ======== ======== ======== ======== ========
Liabilities:
Current Liabilities 77,481 106,062 112,146 118,205 124,240 130,591 137,272 144,303
8.25% Existing Credit Facility 7,457 7,457 7,457 47,422 87,387 127,352 167,317 207,282
Total LT Debt 300,859 328,657 360,624 352,726 343,243 329,181 310,029 257,894
Other Liabilities 51 51 51 51 51 51 51 51
-------- -------- -------- -------- -------- -------- -------- --------
Total Liabilities 385,848 442,227 480,278 518,405 554,922 587,175 614,669 609,530
Preferred Stock - - - - - - - -
Common Shareholder's Equity (30,268) (59,255) (91,858) (127,494) (164,669) (200,397) (234,170) (238,103)
-------- -------- -------- -------- -------- -------- -------- --------
Total Liabilities and Equity $355,580 $382,972 $388,420 $390,910 $390,252 $386,778 $380,499 $371,427
======== ======== ======== ======== ======== ======== ======== ========
Check - - - (0) 0 (0) 0 (0)
Star Pro Forma Cash Flow Statement
Net Income $ 4,970 $ 2,830 $ 3,156 $ 5,021 $ 7,342 $ 10,262 $ 41,066
Depreciation and Amortization 44,778 49,354 52,613 55,888 59,173 62,468 65,774
Deferred Taxes - - - - - - -
Other Assets/Liabilities - - - - - - -
Change in Non-Cash Working Capital - - - - - 0 -
-------- -------- -------- -------- -------- -------- --------
Cash from Operations 49,748 52,185 55,769 60,909 66,515 72,730 106,840
Maintenance CapEx (6,774) (6,895) (7,194) (7,316) (7,442) (7,572) (7,706)
Internal Growth CapEx (1,797) (1,824) (1,850) (1,878) (1,906) (1,935) (1,965)
External Growth CapEx (45,000) (40,000) (40,000) (40,000) (40,000) (40,000) (40,000)
-------- -------- -------- -------- -------- -------- --------
Cash from Investments (53,571) (48,719) (49,044) (49,194) (49,348) (49,507) (49,671)
Acquisition Borrowing 46,797 46,824 1,850 1,878 1,906 1,935 1,965
Remaining Distributions to Repay Debt (8,982) (9,822) (9,748) (11,362) (15,968) (21,088) (54,099)
Amortization of Existing Debt (5,478) (8,141) (60) (60) (120) - -
Borrowing to Repay Existing Debt 5,478 8,141 60 60 120 - -
Borrowing for Changes in WC - - - - - (0) -
Change in Common Equity - - - - - - -
Distributions (33,957) (35,433) (38,792) (42,196) (43,070) (44,035) (44,999)
-------- -------- -------- -------- -------- -------- --------
Cash from Financing 3,858 1,569 (46,690) (51,680) (57,132) (63,188) (97,134)
Net Cash Flow 35 5,035 (39,965) (39,965) (39,965) (39,965) (39,965)
Initial Cash Balance 10,982 1,000 1,000 1,000 1,000 1,000 1,000
-------- -------- -------- -------- -------- -------- --------
Cash Available for Paydown on
WC Revolver and Acq. Facility 11,017 6,035 (38,965) (38,965) (38,965) (38,965) (38,965)
Minimum Cash Balance 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Borrowing/(Paydown) on
WC Revolver and Acq. Facility (10,017) (5,035) 39,965 39,965 39,965 39,965 39,965
-------- -------- -------- -------- -------- -------- --------
Ending Cash Balance 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Net Change in Cash ($9,982) $0 ($0) $0 ($0) $0 ($0)
======== ======== ======== ======== ======== ======== ========
</TABLE>
13 of 18
<PAGE>
Project Heat
- --------------------------------------------------------------------------------
(in thousands except per share and per unit data)
<TABLE>
<CAPTION>
Star Pro Forma Income Statement
Projected
Estimated Normalized -----------------------------------------------------------------------
1998 1998 1999 2000 2001 2002 2003 2004 2005
--------- ---------- ------- ------- ------- ------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Scenario III: Worst Case
8.04% 1st Mortgage Notes
Beginning Balance $85,000 $85,000 $85,000 $85,000 $85,000 $85,000 $85,000 $85,000 $85,000
Borrowing - - - - - - - - -
Amortization - - - - - - - - -
------- ------- ------- ------- ------- ------- ------- -------- --------
Ending Balance 85,000 85,000 85,000 85,000 85,000 85,000 85,000 85,000 85,000
Interest Payment 8.04% 6,834 6,834 6,834 6,834 6,834 6,834 6,834 6,834 6,834
7.17% Pearl Notes
Beginning Balance 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000
Borrowing - - - - - - - - -
Amortization - - - - - - - - -
------- ------- ------- ------- ------- ------- ------- -------- --------
Ending Balance 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000
Interest Payment 7.17% 789 789 789 789 789 789 789 789 789
0.00% Other Notes
Beginning Balance - - - - - - - - -
Borrowing - - - - - - - - -
Amortization - - - - - - - - -
------- ------- ------- ------- ------- ------- ------- -------- --------
Ending Balance - - - - - - - - -
Interest Payment 0.00% - - - - - - - - -
8.50% New Debt
Beginning Balance 125,000 125,000 125,000 130,478 138,619 138,679 138,739 138,859 138,859
Borrowing - - 5,478 8,141 60 120 120 - -
Amortization - - - - - - - - -
------- ------- ------- ------- ------- ------- ------- -------- --------
Ending Balance 125,000 125,000 130,478 138,619 138,679 138,739 138,859 138,859 138,859
Interest Payment 8.50% 10,625 10,625 10,858 11,437 11,785 11.790 11,798 11,803 11,803
Exchange of 8.46%
Senior Notes
Beginning Balance - - 66,000 66,000 66,000 66,000 66,000 66,000 66,000
Borrowing 66,000 66,000 - - - - - - -
Amortization - - - - - - - - -
------- ------- ------- ------- ------- ------- ------- -------- --------
Ending Balance 66,000 66,000 66,000 66,000 66,000 66,000 66,000 66,000 66,000
Interest Payment 8.46% 5,584 5,584 5,584 5,584 5,584 5,584 5,584 5,584 5,584
8.00% Acq. & Other
Notes Payable
Beginning Balance 16,798 16,798 13,859 8,381 240 180 120 - -
Borrowing - - - - - - - - -
Amortization (2,939) (2,939) (5,478) (8,141) (60) (60) (120) - -
------- ------- ------- ------- ------- ------- ------- -------- --------
Ending Balance 13,859 13,859 8,381 240 180 120 - - -
Interest Payment 8.00% 1,226 1,226 890 345 17 12 5 - -
8.25% WC Revolver
Beginning Balance - - 7,457 7,457 7,457 47,422 87,387 127,352 167,317
Borrowing for Change in WC - - - - - - - (0) -
Borrowing/(Payment) - - - - 39,965 39,965 39,965 39,965 39,965
------- ------- ------- ------- ------- ------- ------- -------- --------
Ending Balance - 7,457 7,457 7,457 47,422 87,387 127,352 167,317 207,282
Effective Avg WC Balance 23,600 23,600 21,500 21,500 21,500 21,500 21,500 21,500 21,500
Interest Payment 8.25% 1,947 1,947 1,774 1,774 1,774 1,774 1,774 1,774 1,774
7.50% Acquisition Facility
Beginning Balance - - - 27,798 59,765 51,867 42,384 28,322 9,170
External Acquisitions 40,000 45,000 - -
External Acquisitions at
Beginning of 1999 - - 5,000 - - - - - -
Internal Acquisitions - - 1,797 1,824 1,850 1,878 1,906 1,935 1,965
Payment - - (10,017) (5,035) - - - - -
Remaining Distributions
to Repay Debt - - (8,982) (9,822) (9,748) (11,362) (15,968) (21,088) (54,099)
------- ------- ------- ------- ------- ------- ------- -------- --------
Ending Balance - - 27,798 59,765 51,867 42,384 28,322 9,170 (42,965)
Interest Payment 7.50% $0 $0 $1,230 $3,284 $4,186 $3,534 $2,651 $1,406 ($1,267)
14 of 18
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT HEAT
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands except per share and per unit data) Scenario III Worst Case
Estimated Normalized Projected
----------------------------------
STAR PRO FORMA DEBT SCHEDULE (CONT'D) 199? 1998 1999 2000 2001
--------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
TOTAL PRO FORMA DEBT
Beginning Balance $237,798 $237,798 $308,316 $336,114 $368,081
Amortization of Existing Debt (2,939) (2,939) (5,478) (8,141) (60)
Borrowing for Changes in WC - - - - -
Acquisition Borrowing - - 46,797 46,824 1,850
Borrowing to Repay Existing Debt - - 5,478 8,141 60
Remaining Distributions to Repay Debt - - (8,982) (9,822) (9,748)
Borrowings/(Payment) on WC Revolver and Acq. Facility - - (10,017) (5,035) 39,965
--------- ---------- --------- ---------- -----------
Ending Balance 234,859 234,859 336,114 368,081 400,148
Interest Expense 27,005 27,005 27,957 30,045 30,968
Chase Fees 692 692 692 692 692
--------- ---------- --------- ---------- -----------
Total Interest Payment 27,697 27,697 28,649 30,737 31,660
========= ========== ========= ========== ===========
<CAPTION>
----------------------------------------------
STAR PRO FORMA DEBT SCHEDULE (CONT'D) 2002 2003 2004 2005
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
TOTAL PRO FORMA DEBT
Beginning Balance $400,148 $430,630 $456,533 $477,346
Amortization of Existing Debt (60) (120) - -
Borrowing for Changes in WC - - (O) -
Acquisition Borrowing 1,878 1,906 1,935 1,965
Borrowing to Repay Existing Debt 60 120 - -
Remaining Distributions to Repay Debt (11,362) (15,968) (21,088) (54,099)
Borrowing/(Payment) on WC Revolver and Acq. Facility 39,965 39,965 39,965 39,965
--------- ---------- --------- ----------
Ending Balance 430,630 456,533 477,346 465,176
Interest Expense 30,317 29,434 28,189 25,516
C???? Fees 692 692 692 692
--------- ---------- --------- ----------
Total Interest Payment 31,009 30,126 28,881 $ 26,208
========= ========== ========= ==========
</TABLE>
15 of 18
<PAGE>
Project Heat
- --------------------------------------------------------------------------------
(in thousands except per share and per unit data)
Scenario III: Worst Case
Star Pro Forma Distribution Schedule of Actual Distributions
<TABLE>
<CAPTION>
Estimated Normalized Projected
----------------------------------------------------------------------
1998 1998 1999 2000 2001 2002 2003 2004 2005
--------- ---------- ------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Distributable Cash
- ------------------
Cash from Operations
(excl chg in WC) $29,792 $38,884 $49,748 $52,185 $55,769 $60,909 $66,515 $72,730 $106,840
Maintenance CapEx (6,210) (6,210) (6,774) (6,895) (7,194) (7,316) (7,442) (7,572) (7,706)
Other (384) (384) (35) (35) (35) (35) (35) (35) (35)
-------- ------- ------- ------- ------- ------- -------- -------- --------
Total MLP Distributable
Cash Flow 23,197 32,289 42,939 45,255 48,540 53,558 59,038 65,123 99,099
Distributable Cash Flow / Unit $1.57 $2.19 $2.91 $3.07 $3.29 $3.63 $4.00 $4.41 $6.71
Structure
- ---------
Common Unit Ending Balance 10,418 10,418 10,418 10,418 10,418 10,418 10,418 10,418 10,418
SR Subordinated Units 3,296 3,296 3,296 3,296 3,296 3,296 3,296 3,296 3,296
Subordinated Units 754 754 754 754 754 754 754 754 754
General Partner Interest Unit
Equivalent 295 295 295 295 295 295 295 295 295
-------- ------- ------- ------- ------- ------- -------- -------- --------
Total Units Outstanding 14,764 14,764 14,764 14,764 14,764 14,764 14,764 14,764 14,764
Distribution Levels $2.20 $2.20 $2.20 $2.20 $2.20 $2.20 $2.20 $2.20 $2.20
- -------------------
MQD $2.20 $2.20 $2.20 $2.20 $2.20 $2.20 $2.20 $2.20 $2.20
First Target $2.42 $2.42 $2.42 $2.42 $2.42 $2.42 $2.42 $2.42 $2.42
Second Target $2.84 $2.84 $2.84 $2.84 $2.84 $2.84 $2.84 $2.84 $2.84
Third Target $3.70 $3.70 $3.70 $3.70 $3.70 $3.70 $3.70 $3.70 $3.70
Indicated Cash Distribution $2.20 $2.20 $2.30 $2.40 $2.60 $2.80 $2.85 $2.90 $2.95
Distribution of MQD
- -------------------
Cash Available 23,197 32,289 42,939 45,255 48,540 53,558 59,038 65,123 99,099
Allocation to:
Common Units 22,733 22,920 22,920 22,920 22,920 22,920 22,920 22,920 22,920
SR Subordinated Units 0 7,251 7,251 7,251 7,251 7,251 7,251 7,251 7,251
Subordinated Units 0 1,472 1,659 1,659 1,659 1,659 1,659 1,659 1,659
General Partner Interest 464 646 650 650 650 650 650 650 650
First Target Distribution
- -------------------------
Cash Available 0 0 10,458 12,775 16,060 21,078 26,558 32,643 66,619
Cash Required for
Target Distribution 0 0 3,248 3,248 3,248 3,248 3,248 3,248 3,248
Cash Required for
Indicated Distribution 0 0 1,476 2,953 5,905 8,858 9,596 10,335 11,073
Actual Cash Distributed 0 0 1,476 2,953 3,248 3,248 3,248 3,248 3,248
Allocation to:
Common Units 0 0 1,042 2,084 2,292 2,292 2,292 2,292 2,292
SR Subordinated Units 0 0 330 659 725 725 725 725 725
Subordinated Units 0 0 75 151 166 166 166 166 166
General Partner Interest 0 0 30 59 65 65 65 65 65
Total Distributions to:
Common Units 0 0 1,042 2,084 2,292 2,292 2,292 2,292 2,292
SR Subordinated Units 0 0 330 659 725 725 725 725 725
Subordinated Units 0 0 75 151 166 166 166 166 166
General Partner Interest 0 0 30 59 65 65 65 65 65
PaineWebber Incorporated 16 of 18 For Discussion Purposes Only
</TABLE>
<PAGE>
Project Heat
================================================================================
(In thousands except per share and per unit data)
<TABLE>
<CAPTION>
Star Gas Pro Forma Schedule of Actual Distributions (cont'd) Scenario III: Worst Case
Projected
Estimated Normalized ------------------------------------------------------------------
1998 1998 1999 2000 2001 2002 2003 2004 2005
--------- ---------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Second Target Distribution
- --------------------------
Cash Available 0 0 0 0 12,812 17,830 23,310 29,395 63,370
Cash Required for Target Distribution 0 0 0 0 7,149 7,149 7,149 7,149 7,149
Cash Required for Indicated Distribution 0 0 0 0 3,064 6,468 7,319 8,170 9,022
Actual Cash Distributed 0 0 0 0 3,064 6,468 7,149 7,149 7,149
Allocation to:
Common Units 0 0 0 0 1,875 3,959 4,376 4,376 4,376
Sr. Subordinated Units 0 0 0 0 593 1,252 1,384 1,384 1,384
Subordinated Units 0 0 0 0 136 287 317 317 317
General Partner Interest 0 0 0 0 61 129 143 143 143
Incentive Right 0 0 0 0 398 841 929 929 929
Incentive Right to GP Interest 0 0 0 0 96 203 224 224 224
Incentive Right to Sr. Sub Units 0 0 0 0 302 638 705 705 705
Total Distributions to:
Common Units 0 0 0 0 1,875 3,959 4,376 4,376 4,376
Sr. Subordinated Units 0 0 0 0 895 1,890 2,089 2,089 2,089
Subordinated Units 0 0 0 0 136 287 317 317 317
General Partner Interest 0 0 0 0 157 332 367 367 367
Third Target Distribution
- -------------------------
Cash Available 0 0 0 0 0 0 16,161 22,245 56,221
Cash Required for Target Distribution 0 0 0 0 0 0 16,591 16,591 16,591
Cash Required for Indicated Distribution 0 0 0 0 0 0 193 1,157 2,122
Actual Cash Distribution 0 0 0 0 0 0 193 1,157 2,122
Allocation to:
Common Units 0 0 0 0 0 0 104 625 1,146
Sr. Subordinated Units 0 0 0 0 0 0 33 198 363
Subordinated Units 0 0 0 0 0 0 8 45 83
General Partner Interest 0 0 0 0 0 0 4 23 42
Incentive Right 0 0 0 0 0 0 44 266 488
Incentive Right to GP Interest 0 0 0 0 0 0 11 64 118
Incentive Right to Sr. Sub Units 0 0 0 0 0 0 34 202 370
Total Distribution to:
Common Units 0 0 0 0 0 0 104 625 1,146
Sr. Subordinated Units 0 0 0 0 0 0 67 400 733
Subordinated Units 0 0 0 0 0 0 8 45 83
General Partner Interest 0 0 0 0 0 0 15 87 160
Remaining Distribution
- ----------------------
Cash Available 0 0 0 0 0 0 0 0 0
Cash Required for Indicated Distribution 0 0 0 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0 0 0 0
Incentive Right 0 0 0 0 0 0 0 0 0
Incentive Right to GP Interest 0 0 0 0 0 0 0 0 0
Incentive Right to Sr.Sub Units 0 0 0 0 0 0 0 0 0
Repay Indebtedness 0 0 8,982 9,822 9,748 11,362 15,968 21,088 54,099
Total Distributions to:
Common Units 0 0 0 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0 0 0 0
</TABLE>
17 of 18
<PAGE>
<TABLE>
<CAPTION>
PROJECT HEAT
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands except per share and per unit data)
STAR GAS PRO FORMA SCHEDULE OF ACTUAL DISTRIBUTIONS (CONT'D) Scenario III: Worst Case
Estimated Normalized Projected
--------------------------------------------------------
1998 1998 1999 2000 2001 2002 2003
--------- ---------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Distributions
- -------------------
Common Units $ 22,733 $ 22,920 $ 23,962 $ 25,004 $ 27,088 $ 29,171 $ 29,692
S R Subordinated Units 0 7,251 7,581 7,910 8,872 9,867 10,132
Subordinated Units 0 1,472 1,734 1,810 1,961 2,112 2,149
General Partner Interest 464 646 679 709 872 1,047 1,097
-------- -------- -------- -------- -------- -------- ----------
Total Distributions $ 23,197 $ 32,289 $ 33,957 $ 35,433 $ 38,792 $ 42,196 $ 43,070
======== ======== ======== ======== ======== ======== ==========
Total Distributions Per Unit
- ----------------------------
Common Units $ 2.18 $ 2.20 $ 2.30 $ 2.40 $ 2.60 $ 2.80 $ 2.85
S R Subordinated Units 0.00 2.20 2.30 2.40 2.69 2.99 3.07
Subordinated & GP Units 0.44 2.02 2.30 2.40 2.70 3.01 3.09
Total Incentive Distributions NPV
------------
To GP Interest $ 357 $ 0 $ 0 $ 0 $ 0 $ 96 $ 203 $ 235
To Sr. Sub Units 1,121 - - - - 302 638 739
------------- -------- -------- -------- -------- -------- -------- ----------
Sub-Total 1,478 - - - - 398 841 974
Present Value of - - - - - - -
Terminal Value 1,189
-------------
Total $2,667
<CAPTION>
----------------------
2004 2005
--------- ----------
<S> <C> <C>
Total Distributions
- -------------------
Common Units $ 30,213 $ 30,734
S R Subordinated Units 10,465 10,798
Subordinated Units 2,187 2,225
General Partner Interest 1,169 1,242
-------- --------
Total Distributions $ 44,035 $ 44,999
======== ========
Total Distributions Per Unit
- ----------------------------
Common Units $ 2.90 $ 2.95
S R Subordinated Units 3.18 3.28
Subordinated & GP Units 3.20 3.30
Total Incentive Distributions
To GP Interest $ 289 $ 342
To Sr. Sub Units 907 1,075
-------- --------
Sub-Total 1,196 1,417
Present Value of
Terminal Value - 5,670
Total
</TABLE>
18 of 18
<PAGE>
Project Heat
- --------------------------------------------------------------------------------
Transaction Summary and Assumptions
(In thousands except per share and per unit data) Scenario I: Base Case
<TABLE>
<CAPTION>
EQUITY RESTRUCTURING CALCULATION OF SUB/GP UNITS OFFERED
- ---------------------------------------------------------------------------- --------------------------------------------
Petro
-------------------------
Public Insiders
---------- ------------
<S> <C> <C> <C>
Securities Offered Sr Sub Sub & GP Value of Sub/GP Units to be
Incentive Rights 76% 24% To Be Converted $18,597
Value Offered $3.15 $3.15 Less: Value of GP 6,284
---------------------
Current Market $1.63 $1.63 12,313
Premium to Market 93.8% 93.8% Remainder at $16.33 754
Required Yield w/out PV of Incent. Rights 11.5% 14.0%
Value of Security w/out PV of Incent. Rights $19.13 $15.71
Assumed Value of Incentive Rights $0.61 $0.61
Value of Security Offered $19.74 $16.33 PRESENT VALUE OF INCENTIVE RIGHTS
Security Offered per Share 0.16 0.19 Discount Rate 25%
Total Shares 17,160 9,404 PV of Cash Flows 1997-2005 1,478
Insiders to Receive Sr. Sub. 3,500 (3,500) PV of Terminal Value 4x 1,189
--------------------
Shares to Be Converted 20,660 5,904 Total PV of Incentive Rights 2,667
Units Offered 3,296 754
Current Sub/GP 0 Value of Incentive Rights per Unit $0.61
Value of GP/Unit $21.28
</TABLE>
<TABLE>
<CAPTION>
DEBT RESTRUCTURING
- ---------------------------------------------------------------------------------------------------------
Projected
12/31/97
Privates: Principal Strategy Price
------------- ----------- ---------
<S> <C> <C> <C>
11.96% Sr Notes 60,000 Exchange 110.0%
14.10% Sr Notes 3,100 Neg. Tender 110.0%
14.10% Sub Notes 3,100 Neg. Tender 110.0%
14.33% Pfd Stock 4,167 Neg. Tender 105.0%
Publics:
10.13% Sub Notes & Sr Notes 50,000 Neg. Tender 100.0%
9.38% Sub Notes & Sr Notes 75,000 Tender 100.0%
12.25% Sub Notes & Sr Notes 81,250 Tender 105.0%
12.88% Pfd Stock 30,000 Tender 100.0%
</TABLE>
<TABLE>
<CAPTION>
FINANCING SUMMARY
- ---------------------------------------------------------------------------------------------------------
Amount Rate Unit Price
------------- ----------- ----------
<S> <C> <C> <C>
New Common Raised $145,728 $22.13
New Debt Raised 125,000 8.50%
</TABLE>
<TABLE>
<CAPTION>
UNITS OUTSTANDING
- --------------------------------------------------------------------------------------------------------------------------
Current Pro Forma
----------------------------- -----------------------------
Privates: Units % Units %
------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Existing Common 3,832 60.3% 3,832 26.0%
New Common 0 0.0% 6,587 44.6%
Common to Petro Shareholders 0 0.0% 0 0.0%
Sr Sub to Petro Shareholders 0 0.0% 3,296 22.3%
Existing Sub 2,396 37.7% 754 5.1%
Implied GP 127 2.0% 295 2.0%
------------- ----------- ------------- -----------
Total Units 6,355 100.0% 14,764 100.0%
============= =========== ============= ===========
</TABLE>
<TABLE>
<CAPTION>
SUMMARY CASH FLOW AND COVERAGE ANALYSIS
- ----------------------------------------------------------------------------------------------------
($ on per Unit basis)
Estimated Normalized Projected
---------------------------------------------------
1998 1998 1999 2000 2001 2002
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Star Stand Alone
EBITDA $18,629 $22,781 $26,730 $28,541 $30,361 $32,188
Interest Expense (7,807) (7,807) (9,114) (10,028) (10,748) (11,276)
Maintenance CapEx (2,710) (2,710) (3,274) (3,395) (3,694) (3,816)
Taxes (25) (25) (25) (25) (25) (25)
----------- ---------- ---------- ---------- ---------- ----------
Distributable Cash Flow $8,087 $12,239 $14,317 $15,093 $15,894 $17,071
=========== ========== ========== ========== ========== ==========
DCF per Common Unit $2.11 $3.19 $3.74 $3.94 $4.15 $4.46
DCF / Common unit MQD 0.94 x 1.42 x 1.66 x 1.75 x 1.85 x 1.98 x
DCF per Total Unit $1.27 $1.93 $2.25 $2.38 $2.50 $2.69
DCF / Total MQD 0.58 x 0.88 x 1.02 x 1.08 x 1.14 x 1.22 x
Indicated Distribution
per Common Unit $2.20 $2.20 $2.20 $2.20 $2.20 $2.20
Star Pro Forma
EBITDA
Star $18,629 $22,781 $26,730 $28,541 $30,361 $32,188
Petro 38,500 43,440 55,798 62,665 69,509 76,324
Synergies 500 500 500 500 500 500
----------- ---------- ---------- ---------- ---------- ----------
Total 57,629 66,721 83,028 91,706 100,370 109,012
----------- ---------- ---------- ---------- ---------- ----------
Interest Expense (27,697) (27,697) (28,488) (30,079) (30,142) (28,240)
Maintenance CapEx (6,210) (6,210) (6,774) (6,895) (7,194) (7,316)
Taxes (525) (525) (525) (525) (525) (525)
----------- ---------- ---------- ---------- ---------- ----------
Distributable Cash Flow $23,197 $32,289 $47,241 $54,207 $62,509 $72,931
=========== ========== ========== ========== ========== ==========
DCF per Common Unit $2.23 $3.10 $4.53 $5.20 $6.00 $7.00
DCF per Total Unit 1.57 2.19 3.20 3.67 4.23 4.94
Indicated Distribution
per Common Unit $2.20 $2.20 $2.30 $2.40 $2.60 $2.80
Pro Forma Coverage Ratios
MQD Coverage
------------
Common Unit 0.99 x 1.38 x 2.02 x 2.32 x 2.67 x 3.12 x
Senior Subordinated Unit 0.75 1.05 1.53 1.76 2.03 2.37
Total Unit 0.71 0.99 1.45 1.67 1.92 2.25
Indicated Distribution Coverage
-------------------------------
Common Unit 0.99 x 1.38 x 1.93 x 2.12 x 2.26 x 2.45 x
Senior Subordinated Unit 0.75 1.05 1.47 1.61 1.72 1.86
Total Unit 0.71 0.99 1.39 1.53 1.63 1.76
Accretion/Dilution
DCF per Unit - Star Stand Alone $1.27 $1.93 $2.25 $2.38 $2.50 $2.69
DCF per Unit - Pro Forma 1.57 2.19 3.20 3.67 4.23 4.94
Pro Forma Credit Analysis
EBITDA/Interest 2.08 x 2.41 x 2.91 x 3.05 x 3.33 x 3.86 x
LT Debt/EBITDA 5.22 4.51 3.91 3.79 3.24 2.72
PaineWebber Incorporated 1 of 18 For Discussion Purposes Only
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT HEAT
- -----------------------------------------------------------------------------------------------------------------------------------
Transaction Summary and Assumptions
(in thousands except per share and per unit data) Scenario I: Base Case
OPERATING ASSUMPTIONS ACQUISITION ASSUMPTIONS
- ---------------------------------------------------- ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Petro Star
------- ------ Petro Multiple 1998 1999 2000 2001 2002
Normalized Maintenance CapEx $3,500 $2,710 ----- -------- ---- ---- ---- ---- ----
Maintenance CapEx Life 15 yrs 15 yrs Amount 4.75x $15,000 $30,000 $30,000 $30,000 $30,000
Growth CapEx Life 15 yrs 15 yrs Timing End Mid Mid Mid Mid
Life of Existing Depreciation 15 yrs 15 yrs %EBITDA 0.0% 50.0% 50.0% 50.0% 50.0%
Interest Income Rate 3.5% 3.5% %Attrition 4.1%
Marginal Tax Rate 33.0% 33.0% Star
Deferred Tax Percent 0.0% ----
Minimum Cash Balance $1,000 Amount 7.00x $20,000 $10,000 $10,000 $10,000 $10,000
Initial Incremental Cash Timing End Mid Mid Mid Mid
Req'd for Distributions $5,000 %EBITDA 0.0% 50.0% 50.0% 50.0% 50.0%
Consolidation Savings $500
Annual Bank Fees $692 $94 Amount 7.00x $5,000
Current Stock Price $1.63 $22.13 Timing Beg
%EBITDA 100.0%
</TABLE>
<TABLE>
<CAPTION>
NEW SECURITY ASSUMPTIONS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
New MLP Equity New Star Debt Advisory Fees
- ------------------------------------------ ------------------------------ -------------------------------------
Gross Proceeds $145,728 Gross Proceeds $125,000 Fairness Opinion $1,000
Common Units to Public 6,587 Gross Spread % 1.0% Financial Advisory $2,500
Gross Spread % 5.0% Gross Spread $ $1,250 Debt Tender Fee 0.26% $507
Gross Spread $ $7,286 Coupon 8.50%
Offering Price/Share $22.13
(current market price)
</TABLE>
<TABLE>
<CAPTION>
EXCHANGE ASSUMPTIONS
- ------------------------------------------------------------------------------------------------
Gets New Units of:
--------------------------------------
Shareholders of: Dividend Common Sr Sub Sub
- -------------------------------------------------- ---------- ----------- -----------
<S> <C> <C> <C>
Public Class A Shares 17,160 $0.30 - 2,738 -
Insider Class A Shares 6,795 $0.30 - - 754
Insider Class B Shares 11 $0.30 - 2 -
Insider Class C Shares 2,598 $0.30 - 556 -
-------- -------- ---------- ----------- -----------
26,563 - 3,296 754
</TABLE>
<TABLE>
<CAPTION>
TRANSACTION COSTS SUMMARY SOURCES AND USES OF FUNDS
- ---------------------------------------------------- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
New MLP Equity $7,286 Sources: Uses:
New Star Debt 1,250 Excess Cash on Hand $2,023 Repay Debt Principal $212,450
Fairness Opinion 1,000 New Star Debt 125,000 Redeem Preferred 34,167
Financial Advisory 2,500 New MLP Equity 145,728 Premium on Redemption/
Solicitation Fees on Exchange
of Outsider Petro Debt 507 Cash Balance 0 Exchange/Defeasance 4,891
Exchange of 11.96% Notes 300 Transaction Fees 17,743
Legal Fees 2,500 Prefunding of Liabilities 3,500
Printing 1,000 -------- --------
Accounting Fees 250 $272,751 $272,751
Other: ======== ========
Environmental 350
Rating Agencies 100
Roadshow 200
Asset Appraisal 250
Solicitation expenses 100
Other Bank Fees 150
--------
$17,743
========
PaineWebber Incorporated 2 of 18
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
TRANSACTION SUMMARY AND ASSUMPTIONS
(In thousands except per share and per unit data)
Scenario I: Base Case
<TABLE>
<CAPTION>
RECAPITALIZATION ASSUMPTIONS
- ------------------------------------------------------------------------------------------------------------------------
(D)efease
(T)ender
(R)edeem Principal Maturity Period Sinking Fund Payment
(E)xchange as of ------------------ Coupon/ ----------------------------
Petro Instruments: (N)othing 9/30/98 m/d yr Dividend Payment Year Start
- -------------------------- ----------- ----------- -------- -------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
11.96% Sr Notes e $ 60,000 v 1-Oct 0 11.960% $0 0
14.10% Sr Notes t 3,100 v 15-Jan 2001 14.100% 1,050 1997
14.10% Sub Notes t 3,100 v 15-Jan 2001 14.100% 1,050 1997
10.13% Sub Notes & Sr Notes t 50,000 v 1-Apr 2003 10.130% -
9.38% Sub Notes & Sr Notes t 75,000 v 1-Feb 2006 9.375% -
12.25% Sub Notes & Sr Notes t 81,250 v 1-Feb 2005 12.250% -
8.00% Acq. & Other Notes
Payable n 13,859 v 0 8.000% - 0
8.25% Existing Credit Facility n 0 v 1998 8.250% -
0.00% Other Notes n 0 v NA NA 0.000% 0 NA
-----------
$286,309
Pfrd. Stock:
- --------------------------
14.33% Pfd Stock t 4,167 v 1-Aug 1999 14.330% 4,167 1997
12.88% Pfd Stock t 30,000 v 15-Feb 2009 12.875% 0
0.00% n 0 0.000% 0
-----------
$ 34,167
-----------
Total Petro $320,476
Star Instruments:
- --------------------------
8.04% 1st Mortgage Notes n 85,000 v NA NA 8.040% - 0
8.25% WC Revolver n 0 NA NA 8.250% - NA
7.50% Acquisition Facility n 0 v NA NA 7.500% - NA
8.50% New Debt n 125,000 v NA NA 8.500% 0 NA
7.17% Pearl Notes n 11,000 NA NA 7.170% 0 NA
-----------
$210,000
-----------
Total Combined $530,476
</TABLE>
<TABLE>
<CAPTION>
Red/Exchg/Defease
% Red/ Red/Exchg Defeasance ---------------------- Exchanged
Petro Instruments: Exchanged Price Price Value Premium Int Rate Security Type
- -------------------------- ----------- ----------- ----------- --------- ---------- ------------ --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11.96% Sr Notes 100.0% 110.0% $66,000 $0 8.5% Sr Notes
14.10% Sr Notes 100.0% 110.0% 3,410 310 Sr Notes
14.10% Sub Notes 100.0% 110.0% 3,410 310 Sub Notes
10.13% Sub Notes & Sr Notes 100.0% 100.0% 106.2% 50,000 - Sub Notes & Sr Notes
9.38% Sub Notes & Sr Notes 100.0% 100.0% 108.2% 75,000 - Sub Notes & Sr Notes
12.25% Sub Notes & Sr Notes 100.0% 105.0% 116.2% 85,313 4,063 Sub Notes & Sr Notes
8.00% Acq. & Other Notes
Payable 0.0% 100.0% - - Acq. & Other Notes
Payable
8.25% Existing Credit Facility 0.0% 100.0% - - Existing Credit
Facility
0.00% Other Notes 0.0% 0.0% - - 11.0% Other Notes
-----------
$4,683
Pfrd. Stock:
- --------------------------
14.33% Pfd Stock 100.0% 105.0% 4,375 208 Pfd Stock
12.88% Pfd Stock 100.0% 100.0% 30,000 - Pfd Stock
0.00% - -
----------- -----------
$ 34,167 $208
-----------
Total Petro $4,891
Star Instruments:
- --------------------------
8.04% 1st Mortgage Notes 0.0% 0.0% - - 1st Mortgage Notes
8.25% WC Revolver 0.0% 0.0% - - WC Revolver
7.50% Acquisition Facility 0.0% 0.0% - - Acquisition Facility
8.50% New Debt 0.0% 0.0% - - New Debt
7.17% Pearl Notes 0.0% 0.0% - - Pearl Notes
-----------
$0
-----------
Total Combined $4,891
</TABLE>
<TABLE>
<CAPTION>
Star Stand Alone Distribution Assumptions
- -------------------------------------------------------------------------------
Marginal Interest In
--------------------
Distribution Public GP
------------ --------- --------
<S> <C> <C> <C>
Minimum Quarterly Distribution $2.20 98% 2%
First Target Distribution $2.42 98% 2%
Second Target Distribution/(1)/ $2.84 85% 15%
Third Target Distribution/(1)/ $3.70 75% 25%
Thereafter NM 50% 50%
Target Distribution Level $2.20
Annual Distribution Increase $0.00
Standard Distribution Structure ("S") or Target ("T") t
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Star Pro Forma Distribution Assumptions
- --------------------------------------------------------------------------------------------------------------------------------
Marginal Interest In Incentive Rights
----------------------------- ----------------------------------
Distribution Public GP Incen. Rt. GP Sr. Sub.
------------ -------- ------ ---------- ------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Minimum Quarterly Distribution $2.20 98% 2% 0% 24% 76%
First Target Distribution $2.42 98% 2% 0% 24% 76%
Second Target Distribution/(1)/ $2.84 85% 2% 13% 24% 76%
Third Target Distribution/(1)/ $3.70 75% 2% 23% 24% 76%
Thereafter NM 50% 2% 48% 24% 76%
1998 1999 2000 2001 2002 Thereafter
------------ ---------- --------- ---------- ------------ -------------------
Annual Indicated Dist. Increase $0.00 $0.10 $0.10 $0.20 $0.20 $0.05
Target Indicated Dist. Level $2.20 $2.30 $2.40 $2.60 $2.80
Standard Distribution Structure ("S") or Target ("T") t
- -------------------------------------------------------------------------------------------------------------
</TABLE>
3 of 18
PaineWebber Incorporated For Discussion
Purposes Only
<PAGE>
PROJECT HEAT
================================================================================
PRO FORMA OPENING BALANCE SHEET
(in thousands except per share and per unit data) Scenario I: Base Case
<TABLE>
<CAPTION>
OPENING BALANCE SHEET STAR GAS PETRO
------------------------------------- -------------------------------------
12/31/97 ADJUSTMENTS 9/30/98 12/31/97 ADJUSTMENTS 9/30/98
---------- ------------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Cash $ 3,452 ($ 2,951) $ 501 $ 2,390 $10,615 $ 13,005
Other Current Assets 18,537 (3,142) 15,395 102,734 (43,030) 59,704
---------- ---------- ---------- ----------
Total Current Assets 21,989 15,895 105,124 72,709
PP&E and Intangibles, Net 108,809 (3,995) 104,814 124,804 - 107,783
Investments in Unconsolidated Affiliates - - - 7,535 (7,122) 413
Other Assets 48,653 (2,115) 46,538 10,383 (19) 10,364
---------- ---------- ---------- ----------
Total Assets 179,451 167,248 247,846 191,269
========== ========== ========== ==========
Liabilities:
Current Liabilities 11,514 (4,143) 7,371 92,688 - 70,110
8.25% Existing Credit Facility - 7,457 7,457 21,500 (21,500) -
Long Term Debt 96,000 - 96,000 278,378 7,931 286,309
Total Preferred Stock - - - 34,167 - 34,167
Other Liabilities 54 (3) 51 10,745 (47) 10,698
---------- ---------- ---------- ----------
Total Liabilities 107,568 110,879 437,478 401,284
Common Shareholder's/Partner's Equity 71,883 (15,515) 56,368 (189,632) (20,383) (210,015)
---------- ---------- ---------- ----------
Total Liabilities and Equity $179,451 $167,248 $247,846 $191,269
========== ========== ========== ==========
check - - -
<CAPTION>
PRO FORMA
MERGER STAR GAS
ADJUSTMENTS 9/30/98
----------- -----------
<S> <C> <C>
ASSETS:
Cash ($ 2,023) $ 10,982
Order Current Assets - 75,099
----------- -----------
Total Current Assets (2,023) 86,081
PP&B and Intangibles, Net - 212,597
Investments in Unconsolidated Affiliates (413) -
Other Assets - 56,902
----------- -----------
Total Assets (2,436) 355,580
LIABILITIES:
Current Liabilities - 77,481
8.25% Existing Credit Facility - 7,457
Long Term Debt (81,450) 300,859
Total Preferred Stock (34,167) -
Other Liabilities (10,698) 51
----------- -----------
Total Liabilities (126,315) 385,848
Commerce Shareholder's/Partner's Equity 123,378 (30,268)
----------- -----------
Total Liabilities and Equity ($ 2,937) $355,580
===========
check -
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA CAPITAL STRUCTURE STAR GAS PETRO
------------------------------------- -------------------------------------
12/31/97 ADJUSTMENTS 9/30/98 12/31/97 ADJUSTMENTS 9/30/98
---------- ------------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Debt:
8.04% 1st Mortgage Notes $ 85,000 $ 85,000 $ 0 $ 0 $ 0
8.25% WC Revolver - 7,457 7,457 - - -
7.50% Acquisition Facility - - - - -
7.17% Pearl Notes 11,000 11,000 - - -
11.96% Sr Notes - - 60,000 - 60,000
14.10% Sr Notes - - 4,150 (1,050) 3,100
14.10% Sub Notes - - 4,150 (1,050) 3,100
10.13% Sub Notes & Sr Notes - - 50,000 - 50,000
9.38% Sub Notes & Sr Notes - - 75,000 - 75,000
12.25% Sub Notes & Sr Notes - - 81,250 - 81,250
0.00% Other Notes - - 0 - 0
8.00% Acg. & Other Notes Payable - - 16,798 (2,939) 13,859
8.25% Existing Credit Facility - - 0 - 0
8.46% Exchanged Debt - - - - -
8.50% New Debt - - - - -
---------- ---------- ---------- ----------
Total Debt 96,000 103,457 291,348 286,309
---------- ---------- ---------- ----------
Preferred Stock:
14.33% Pfd Stock - - 4,167 - 4,167
12.88% Pfd Stock - - 30,000 - 30,000
---------- ---------- ---------- ----------
Total Preferred - - 34,167 34,167
---------- ---------- ---------- ----------
Common Shareholder's/Partner's Equity 71,883 56,368 (189,632) (20,383) (210,015)
---------- ---------- ---------- ----------
Total Capital $167,883 $159,825 $135,883 $110,461
========== ========== ========== ==========
<CAPTION>
PRO FORMA
MERGER STAR GAS
ADJUSTMENTS 9/30/98
----------- -----------
<S> <C> <C> <C>
Debt:
8.04% 1st Mortgage Notes $ 0 $ 85,000
8.25% WC Revolver - 7,457
7.50% Acquisition Facility - -
7.17% Pearl Notes - 11,000
11.96% Sr Notes (60,000) -
14.10% Sr Notes (3,100) -
14.10% Sub Notes (3,100) -
10.13% Sub Notes & Sr Notes (50,000) -
9.38% Sub Notes & Sr Notes (75,000) -
12.25% Sub Notes & Sr Notes (81,250) -
0.00% Other Notes - -
8.00% Acq. & Other Notes Payable - 13,859
8.25% Existing Credit Facility - -
8.46% Exchanged Debt 66,000 66,000
8.50% New Debt 125,000 125,000
----------- -----------
Total Debt (81,450) 308,316 (123,543,00)
-----------
Preferred Stock:
14.33% Pfd Stock (4,167) -
12.88% Pf\ Stock (30,000) -
----------- -----------
Total Preferred (34,167) -
Common Shareholder's/Partner's Equity 123,378 (30,268)
-----------
Total Capital $278,048
===========
</TABLE>
4 of 18
<PAGE>
<TABLE>
<CAPTION>
PROJECT HEAT
- -------------------------------------------------------------------------------------------------------------------------------
(in thousands except per share and per unit data)
Scenario 1: Base Case
STAR GAS STAND ALONE INCOME STATEMENT
Estimated Normalized Projected
--------------------------------------------------------------------
1998 1998 1999 2000 2001 2002 2003 2004 2005
--------- ---------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EBITDA $ 18,629 $ 22,781 $ 26,730 $ 28,541 $ 30,361 $ 32,188 $ 34,125 $ 36,178 $ 38,356
Depreciation and Amortization 11,629 11,629 12,768 15,111 16,137 17,178 1?,229 19,291 20,364
--------- ---------- -------- -------- -------- -------- -------- -------- --------
EBIT 7,000 11,152 13,962 13,430 14,224 15,010 15,896 16,887 17,992
Interest Response (7,807) (7,807) (9,114) (10,028) (10,748) (11,276) (9,858) (10,217) (10,452)
Interest Income 18 18 35 35 35 35 35 35 35
Other Income - - - - - - - - -
--------- ---------- -------- -------- -------- -------- -------- -------- --------
Income Before Taxes (789) 3,363 4,883 3,437 3,511 3,769 6,073 6,705 7,575
Current Income Taxes (25) (25) (25) (25) (25) (25) (25) (25) (25)
Deferred Income Taxes - - - - - - - - -
--------- ---------- -------- -------- -------- -------- -------- -------- --------
Net Income Available to Common ($814) $ 3,338 $ 4,858 $ 3,412 $ 3,486 $ 3,744 $ 6,048 $ 6,680 $ 7,550
========= ========== ======== ======== ======== ======== ======== ======== ========
STAR GAS STAND ALONE UNITS
Outstanding
Common Units
Beginning Balance 3,832 3,832 3,832 4,317 4,317 4,517 4,717 4,717 4,717
Insurance 0 0 485 0 200 200 0 0 0
Buyback 0 0 0 0 0 0 0 0 0
--------- ---------- -------- -------- -------- -------- -------- -------- --------
Ending Balance 3,832 3,832 4,317 4,317 4,517 4,717 4,717 4,717 4,717
--------- ---------- -------- -------- -------- -------- -------- -------- --------
Subordinated Units
Beginning Balance 2,396 2,396 2,396 2,396 2,396 2,396 2,396 2,396 2,396
Insurance 0 0 0 0 0 0 0 0 0
Buyback 0 0 0 0 0 0 0 0 0
--------- ---------- -------- -------- -------- -------- -------- -------- --------
Ending Balance 2,396 2,396 2,396 2,396 2,396 2,396 2,396 2,396 2,396
--------- ---------- -------- -------- -------- -------- -------- -------- --------
GP Implied Units
Beginning Balance 127 127 127 127 127 127 127 127 127
Insurance 0 0 0 0 0 0 0 0 0
Buyback 0 0 0 0 0 0 0 0 0
--------- ---------- -------- -------- -------- -------- -------- -------- --------
Ending Balance 127 127 127 127 127 127 127 127 127
--------- ---------- -------- -------- -------- -------- -------- -------- --------
Total Units 6,355 6,355 6,840 6,840 7,040 7,240 7,240 7,240 7,240
========= ========== ======== ======== ======== ======== ======== ======== ========
</TABLE>
PaineWebber Incorporated For discussion purposes only
5 of 18
<PAGE>
PROJECT HEAT
================================================================================
(in thousands except per share and per unit data)
<TABLE>
<CAPTION>
Scenario 1: Base Case Estimated Projected
----------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005
-------- ------ ------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STAR GAS STAND ALONE BALANCE SHEET
Assets:
Cash $ 501 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000
Other Current Assets 15,395 18,600 19,317 20,037 20,760 21,526 22,339 23,200
--------- -------- -------- -------- ------- ------- ------- -------
Total Current Assets 15,895 19,600 20,317 21,037 21,760 22,526 23,339 24,200
PP&E and Intangibles, Net 104,814 112,117 112,225 111,632 110,148 107,768 104,484 100,291
Other Assets 46,538 46,538 46,538 46,538 46,538 46,538 46,538 46,538
--------- -------- ------- ------- ------- ------- ------- -------
Total Assets 167,248 178,255 179,080 179,207 178,446 176,832 174,361 171,029
========= ======== ======= ======= ======= ======= ======= =======
Liabilities:
Current Liabilities 7,371 10,576 11,293 12,013 12,736 13,502 14,315 15,176
Total Debt 103,457 109,651 120,328 125,205 130,133 135,685 139,702 141,910
Other Liabilities 51 51 51 51 51 51 51 51
--------- -------- -------- -------- -------- ------- ------- -------
Total Liabilities 110,879 120,279 131,672 137,869 142,920 149,239 154,068 157,167
Partner's Equity 56,368 57,976 47,407 41,338 35,526 27,593 20,293 13,862
--------- -------- -------- -------- -------- -------- -------- --------
Total Liabilities and Equity $ 167,248 $178,255 $179,082 $179,207 $178,446 $176,832 $174,361 $171,029
========= ======== ======== ======== ======== ======== ======== ========
Check - - - - - - - -
STAR GAS STAND ALONE CASH FLOW STATEMENT
Net Income $ 4,858 $ 3,412 $ 3,486 $ 3,744 $ 6,048 $ 6,680 $ 7,550
Depreciation and Amortization 12,768 15,111 16,137 17,178 18,229 19,291 20,364
Deferred Taxes - - - - - - -
Other Income - - - - - - -
Other Asset/Liabilities - - - - - - -
Change in Working Capital (0) - (0) (0) 0 (0) (0)
-------- -------- -------- -------- ------- ------- -------
Cash from Operations 17,626 18,523 19,623 20,922 24,277 25,971 27,914
-------- -------- -------- -------- ------- ------- -------
Maintenance CapEx (3,274) (3,395) (3,694) (3,816) (3,942) (4,072) (4,206)
Internal Growth CapEx (1,797) (1,824) (1,850) (1,878) (1,906) (1,935) (1,965)
External Growth CapEx (15,000)(10,000) (10,000) (10,000) (10,000) (10,000) (10,000)
-------- -------- -------- -------- ------- ------- -------
Cash from Investments (20,071)(15,219) (15,544) (15,694) (15,848) (16,007) (16,171)
-------- -------- -------- -------- ------- ------- -------
Acquisition Borrowing 16,797 11,824 11,850 11,878 11,906 11,935 11,965
Remaining Distributions to Repay Debt (336) (1,112) (1,913) (3,090) (6,319) (7,884) (9,692)
Amortization of Mortgage Notes - - - - - - -
Borrowing to Repay Existing Debt - - - - - - -
Borrowing for Changes in WC 0 - 0 0 (0) 0 0
Borrowing to Pay Full MQD - - - - - - -
Change in Equity 10,731 - 4,425 4,425 - - -
Distributions (13,981) (13,981) (13,981) (13,981) (13,981) (13,981)(13,981)
-------- -------- -------- -------- ------- ------- -------
Cash from Financing 13,211 (3,269) 381 (768) (8,393) (9,929)(11,708)
-------- -------- -------- -------- ------- ------- -------
Net Cash Flow 10,766 35 4,460 4,460 35 35 35
Initial Cash Balance 501 1,000 1,000 1,000 1,000 1,000 1,000
-------- -------- -------- -------- ------- ------- -------
Cash Available for Paydown on WC Revolver and Acq. Facility 11,266 1,035 5,460 5,460 1,035 1,035 1,035
Minimum Cash Balance 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Borrowing (Paydown) on WC Revolver and Acq. Facility (10,266) (35) (4,460) (4,460) (35) (35) (35)
-------- -------- -------- -------- ------- ------- -------
Net Change in Cash 499 - - - - - 0
-------- -------- -------- -------- ------- ------- -------
Ending Cash Balance $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000
======== ======== ======== ======== ======= ======= =======
</TABLE>
6 of 18
<PAGE>
Project Heat
- --------------------------------------------------------------------------------
(in thousands except per share and per unit data)
<TABLE>
<CAPTION>
Scenario I: Base Case Projected
Estimated Normalized -------------------------------------------------------------------------
1998 1998 1999 2000 2001 2002 2003 2004 2005
------- ------- ------- ------- ------- ------- ------- ------- -------
Star Gas Stand Alone
EBITDA Calculation
(See Tab 3: Cases)
- ------------------------------------------------------------------------------------------------------------------------------------
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
EBITDA Growth Rate 22.3% 1.7% 1.7% 1.7% 1.7% 1.7% 17% 1.7%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Base EBITDA Timing
End 1998
Mid 1999
Mid 2000
Mid 2001
Mid 2002
Mid 2003
Mid 2004
Mid 2005
------- ------- ------- ------- ------- ------- ------- ------- -------
Total EBITDA $18,629 $22,781 $26,730 $28,541 $30,361 $32,188 $34,125 $36,178 $38,356
======= ======= ======= ======= ======= ======= ======= ======= =======
Star Gas Stand Alone
Depreciation Calulation
Existing Depreciation $11,629 $11,629 $11,629 $11,629 $11,629 $11,629 $11,629 $11,629 $11.629
Maintenenance CapEx: 1998 2,710 $0 $0 $181 $181 $181 $181 $181 $181 $181
Annual Growth: 3.3% 1999 3,274 109 218 218 218 218 218 218
2000 3,395 113 226 226 226 226 226
2001 3,694 123 246 246 246 246
2002 3,816 127 254 254 254
2003 3,942 131 263 263
2004 4,072 136 271
2005 4,206 140
Internal Growth CapEx: 1998 1,841 - - 123 123 123 123 123 123 123
Annual Growth: 1.5% 1999 1,797 60 120 120 120 120 120 120
2000 1,824 61 122 122 122 122 122
2001 1,850 62 123 123 123 123
2002 1,878 63 125 125 125
2003 1,906 64 127 127
2004 1,935 65 129
2005 1,965 65
External Growth CapEx: 1998 20,000 - - - 1,333 1,333 1,333 1,333 1,333 1,333
Annual Growth: 0.0% 1999 15,000 667 1,000 1,000 1,000 1,000 1,000 1,000
2000 10,000 333 667 667 667 667 667
2001 10,000 333 667 667 667 667
2002 10,000 333 667 667 667
2003 10,000 333 667 667
2004 10,000 333 667
2005 10,000 333
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Depreciation: $11,629 $11,629 $12,768 $15,111 $16,137 $17,178 $18,229 $19,291 $20,364
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
PaineWebber Incorporated 7 of 18 For Discussion Purposes Only
<PAGE>
<TABLE>
<CAPTION>
Project Heat
- --------------------------------------------------------------------------------
Star Gas Stand Alone Debt Schedule
(in thousands except per share and per unit data)
Scenario I: Base Case Projected
Estimated Normalized ------------------------------------------------------------------------
1998 1998 1999 2000 2001 2002 2003 2004 2005
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8.04% 1st Mortgage Notes
Beginning Balance $85,000 $85,000 $85,000 $85,000 $85,000 $85,000 $85,000 $85,000 $85,000
Borrowing 0 0 0 0 0 0 0 0 0
Amortization 0 0 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- ------- ------- -------
Ending Balance 85,000 85,000 85,000 85,000 85,000 85,000 85,000 85,000 85,000
Interest Payment 8.04% 6,834 6,834 6,834 6,834 6,834 6,834 6,834 6,834 6,834
Make-Whole Payment 0 0 0 0 0 0 0 0 0
7.17% Pearl Notes
Beginning Balance $0 $0 $11,000 $11,000 $11,000 $11,000 $11,000 $11,000 $11,000
Borrowing 11,000 11,000 0 0 0 0 0 0 0
Amortization 0 0 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- ------- ------- -------
Ending Balance 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000
Interest Payment 7.17% 613 613 789 789 789 789 789 789 789
% of year Pearl Notes
Outstanding 77.7% 77.7% 0 0 0 0 0 0 0
8.25% WC Revolver
Beginning Balance - - $7,457 $7,457 $7,457 $7,457 $7,457 $7,457 $7,457
Borrowing for Change in WC - - 0 - 0 0 (0) 0 0
Borrowing for Pay Full MQD 5,894 1,742 - - - - - - -
Borrowing/(Payment) 1,563 5,715 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- ------- ------- -------
Ending Balance 7,457 7,457 7,457 7,457 7,457 7,457 7,457 7,457 7,457
Effective Avg WC Balance 3,729 3,729 3,729 3,729 3,729 3,729 3,729 3,729 3,729
Interest Payment 8.25% 308 308 308 308 308 308 308 308 308
7.50% Acquisition Facility
Beginning Balance - - $0 $6,194 $16,871 $22,348 $26,676 $32,228 $36,245
External Acquisitions 20,000 20,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
External Acquisitions at
Beginning of 1999 - - 5,000 - - - - - -
Internal Acquisitions 1,841 1,841 1,797 1,824 1,850 1,878 1,906 1,935 1,965
Borrowings to Repay
Existing Debt - - - - - - - - -
Payment - - (10,266) (35) (4,460) (4,460) (35) (35) (35)
Remaining Distributions
to Repay Debt - - (366) (1,112) (1,913) (3,090) (6,319) (7,884) (9,692)
------- ------- ------- ------- ------- ------- ------- ------- -------
Ending Balance 0 0 6,194 16,871 22,348 26,676 32,228 36,245 38,483
Interest Payment 7.50% 69 69 420 865 1,471 1,838 1,834 2,193 2,427
Total Debt
Beginning Balance $85,000 $85,000 $103,457 $109,651 $120,328 $125,805 $130,133 $135,685 $139,702
Amortization of Mortgage Notes - - - - - - - - -
Borrowing for Pearl Notes 11,000 11,000 - - - - - - -
Borrowing for Changes in WC - - 0 - 0 0 (0) 0 0
Borrowing to Pay Full MQD 5,894 1,742 - - - - - - -
Acquisition Borrowing 21,841 21,841 16,797 11,824 11,850 11,878 11,906 11,935 11,965
Borrowing to Repay Existing Debt - - - - - - - - -
Remaining Distributions to
Repay Debt - - (366) (1,112) (1,913) (3,090) (6,319) (7,884) (9,692)
Borrowing/(Payment) on WC
Revolver and Acq. Facility 1,563 5,715 (10,266) (35) (4,460) (4,460) (35) (35) (35)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Ending Balance $125,298 $125,298 $109,651 $120,328 $125,805 $130,133 $135,685 $139,702 $141,940
======== ======== ======== ======== ======== ======== ======== ======== ========
Interest Expense
Interest Expense $7,824 $7,824 $8,350 $8,795 $9,401 $9,769 $9,764 $10,123 $10,358
Bank Fee 94 94 94 94 94 94 94 94 94
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Interest Payment $7,807 $7,807 $9,114 $10,028 $10,748 $11,276 $9,858 $10,217 $10,452
======= ======= ======= ======= ======= ======= ======= ======= =======
*** Total Interest Numbers are hard input per A.G. Edwards' request.***
PaineWebber Incorporated For discussion purposes only
8 of 18
</TABLE>
<PAGE>
Project Heat
- --------------------------------------------------------------------------------
Star Gas Stand Alone Schedule of Actual Distributions Scenario I: Base Case
(in thousands except per share and per unit data)
<TABLE>
<CAPTION>
Projected
Assumes Revised Target Estimated Normalized -------------------------------------------------------------------------
Distribution Structure 1998 1998 1999 2000 2001 2002 2003 2004 2005
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Distributable Cash
- ------------------
Cash from Operations $10,815 $14,967 $17,626 $18,523 $19,623 $20,922 $24,277 $25,971 $27,914
Maintenance CapEx (2,710) (2,710) (3,274) (3,395) (3,694) (3,816) (3,942) (4,072) (4,206)
Other (18) (18) (35) (35) (35) (35) (35) (35) (35)
------- ------- ------- ------- ------- ------- ------- ------- -------
Total MLP Distributable Cash Flow 8,087 12,239 14,317 15,093 15,894 17,071 20,300 21,864 23,673
Distributable Cash Flow/Unit $ 1.27 $ 1.93 $ 2.25 $ 2.38 $ 2.50 $ 2.69 $ 3.19 $ 3.44 $ 3.73
Structure
- ---------
Common Unit Ending Balance 3,832 3,832 3,832 3,832 3,832 3,832 3,832 3,832 3,832
Subordinated Units 2,396 2,396 2,396 2,396 2,396 2,396 2,396 2,396 2,396
General Partner Interest Unit
Equivalent 127 127 127 127 127 127 127 127 127
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Units Outstanding 6,355 6,355 6,355 6,355 6,355 6,355 6,355 6,355 6,355
Distribution Levels
- -------------------
MQD $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20
First Target $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42
Second Target $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84
Third Target $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70
Indicated Cash Distribution $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20
Distribution of MQD
- -------------------
Cash Available 8,087 12,239 14,317 15,093 15,894 17,071 20,300 21,864 23,673
Cash Borrowed to Pay Full MQD 5,894 1,742 0 0 0 0 0 0 0
Allocation to:
Common Units 8,430 8,430 8,430 8,430 8,430 8,430 8,430 8,430 8,430
Subordinated Units 5,271 5,271 5,271# 5,271# 5,271 5,271# 5,271# 5,271 5,271
General Partner Interest 280 280 280# 280# 280 280# 280# 280 280
First Target Distribution
- -------------------------
Cash Available 0 0 336 1,112 1,913 3,090 6,319 7,884 9,692
Cash Required for Target
Distribution 0 0 1,398 1,398 1,398 1,398 1,398 1,398 1,398
Cash Required for Indicated
Distribution 0 0 0 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0 0 0 0
Second Target Distribution
- --------------------------
Cash Available 0 0 0 0 0 0 0 0 0
Cash Required for Target
Distribution 0 0 0 0 0 0 0 0 0
Cash Required for Indicated
Distribution 0 0 0 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0 0 0 0
Incentive Distribution 0 0 0 0 0 0 0 0 0
Third Target Distribution
- -------------------------
Cash Available 0 0 0 0 0 0 0 0 0
Cash Required for Target
Distribution 0 0 0 0 0 0 0 0 0
Cash Required for Indicated
Distribution 0 0 0 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0 0 0 0
Incentive Distribution 0 0 0 0 0 0 0 0 0
</TABLE>
PaineWebber Incorporated 9 0f 18 For discussion purposes only
<PAGE>
<TABLE>
<CAPTION>
PROJECT HEAT
===================================================================================================================================
STAR GAS STAND ALONE SCHEDULE OF ACTUAL DISTRIBUTIONS (CONT'D) SCENARIO I: BASE CASE
(in thousands except per share and per unit data)
ESTIMATED NORMALIZED PROJECTED
--------------------------------------------------------------------
1998 1998 1999 2000 2001 2002 2003 2004 2005
--------- ---------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Remaining Distribution
- ----------------------
Cash Available 0 0 0 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0 0 0 0
Incentive Distribution 0 0 0 0 0 0 0 0 0
Repay Indebtedness 0 0 336 1,112 1,913 3,090 6,319 7,884 9,692
Total Distributions
- -------------------
Common Units 8,430 8,430 8,430 8,430 8,430 8,430 8,430 8,430 8,430
Subordinated Units 5,271 5,271 5,271 5,271 5,271 5,271 5,271 5,271 5,271
General Partner Interest 280 280 280 280 280 280 280 280 280
Incentive Distribution 0 0 0 0 0 0 0 0 0
--------- ---------- -------- -------- -------- -------- -------- -------- --------
Total Distribution $13,981 $13,981 $13,981 $13,981 $13,981 $13,981 $13,981 $13,981 $13,981
========= ========== ======== ======== ======== ======== ======== ======== ========
Total Distributions Per Unit
- ----------------------------
Common Unit $2.20 $2.20 $2.20 $2.20 $2.20 $2.20 $2.20 $2.20 $2.20
Subordinated Unit 2.20 2.20 2.20 2.20 2.20 2.20 2.20 2.20 2.20
GP Unit 2.20 2.20 2.20 2.20 2.20 2.20 2.20 2.20 2.20
PaineWebber Incorporated For discussion purposes only
</TABLE>
10 of 18
<PAGE>
Project Heat
- --------------------------------------------------------------------------------
(in thousands except per share and per unit data)
<TABLE>
<CAPTION>
Scenario I: Base Case Projected
Estimated Normalized -------------------------------------------------------------------------
1998 1998 1999 2000 2001 2002 2003 2004 2005
------- ------- ------- ------- ------- ------- ------- ------- -------
Petro EBITDA Calculation
- ------------------------------------------------------------------------------------------------------------------------------------
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
EBITDA Growth Rate (4.1)% (4.1)% (4.1)% (4.1)% (4.1)% (4.1)% (4.1)% (4.1)%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Base EBITDA Timing
Acqisitions: End 1998 $15,000
Mid 1999 30,000
Mid 2000 30,000
Mid 2001 30,000
Mid 2002 30,000
Mid 2003 30,000
Mid 2004 30,000
Mid 2005 30,000
------- ------- ------- ------- ------- ------- ------- ------- --------
Total EBITDA $38,500 $43,440 $55,798 $62,665 $69,509 $76,324 $83,807 $92,024 $101,047
======= ======= ======= ======= ======= ======= ======= ======= ========
Petro Depreciation Calculation
Existing Depreciation $29,660 $29,660 $29,660 $29,660 $29,660 $29,660 $29,660 $29,660 $29,660
Maintenenance CapEx: 1998 $3,500 - - $233 $233 $233 $233 $233 $233 $233
Annual Growth: 0.0% 1999 3,500 117 233 233 233 233 233 233
2000 3,500 117 233 233 233 233 233
2001 3,500 117 233 233 233 233
2002 3,500 117 233 233 233
2003 3,500 117 233 233
2004 3,500 117 233
2005 3,500 117
Internal Growth CapEx: 1998 $0 - - - - - - - - -
Annual Growth: 0.0% 1999 0 - - - - - - -
2000 0 - - - - - -
2001 0 - - - - -
2002 0 - - - -
2003 0 - - -
2004 0 - -
2005 0 -
External Growth CapEx: 1998 $15,000 - - 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Annual Growth: 0.0% 1999 30,000 1,000 2,000 2,000 2,000 2,000 2,000 2,000
2000 30,000 1,000 2,000 2,000 2,000 2,000 2,000
2001 30,000 1,000 2,000 2,000 2,000 2,000
2002 30,000 1,000 2,000 2,000 2,000
2003 30,000 1,000 2,000 2,000
2004 30,000 1,000 2,000
2005 30,000 1,000
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Depreciation: $29,660 $29,660 $32,010 $34,243 $36,477 $38,710 $40,943 $43,177 $45,410
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
PaineWebber Incorporated 11 of 18 For Discussion Purposes Only
<PAGE>
Project Heat
- --------------------------------------------------------------------------------
(in thousands except per share and per unit data)
Scenario I: Base Case
STAR PRO FORMA INCOME STATEMENT
<TABLE>
<CAPTION>
Projected
Estimated Normalized ----------------------------------------------------------------------
1998 1998 1999 2000 2001 2002 2003 2004 2005
--------- ---------- ------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Combined EBITDA $57,129 $66,221 $82,528 $91,206 $99,870 $108,512 $117,932 $128,202 $139,402
Consolidated Savings 500 500 500 500 500 500 500 500 500
------- ------- ------- ------- ------- -------- -------- -------- --------
Pro Forma EBITDA 57,629 66,721 83,028 91,706 100,370 109,012 118,432 128,702 139,902
Depreciation and Amortization 41,289 41,289 44,778 49,354 52,613 55,888 59,173 62,468 65,774
------- ------- ------- ------- ------- -------- -------- -------- --------
EBIT 16,340 25,432 38,250 42,352 47,757 53,124 59,260 66,235 74,128
Interest Expense (27,697) (27,697) (28,488) (30,079) (30,142) (28,240) (25,665) (22,206) -
Interest Income 384 384 35 35 35 35 35 35 35
Other Income - - - - - - - - -
EBT (10,972) (1,880) 9,797 12,308 17,650 24,919 33,629 44,063 74,163
------- ------- ------- ------- ------- -------- -------- -------- --------
Current Income Taxes (525) (525) (525) (525) (525) (525) (525) (525) (525)
Deferred Income Taxes - - - - - - - - -
------- ------- ------- ------- ------- -------- -------- -------- --------
Net Income Available to Common ($11,497) ($2,405) $9,272 $11,783 $17,125 $24,394 $33,104 $43,538 $73,638
======= ======== ======= ======= ======= ======== ======= ======== ========
STAR PRO FORMA UNITS OUTSTANDING
Common Units
Beginning Balance 10,418 10,418 10,418 10,418 10,418 10,418 10,418 10,418
Issuance - - - - - - - -
Buyback - - - - - - - -
------- ------- ------- ------- ------- -------- -------- -------- --------
Ending Balance 10,418 10,418 10,418 10,418 10,418 10,418 10,418 10,418 10,418
SR Subordinated Units
Beginning Balance 3,296 3,296 3,296 3,296 3,296 3,296 3,296 3,296
Issuance - - - - - - - -
Buyback - - - - - - - -
------- ------- ------- ------- ------- -------- -------- -------- --------
Ending Balance 3,296 3,296 3,296 3,296 3,296 3,296 3,296 3,296 3,296
Subordinated Units
Beginning Balance 754 754 754 754 754 754 754 754
Issuance - - - - - - - -
Buyback - - - - - - - -
------- ------- ------- ------- ------- -------- -------- -------- --------
Ending Balance 754 754 754 754 754 754 754 754 754
GP Implied Units
Beginning Balance 295 295 295 295 295 295 295 295
Issuance - - - - - - - -
Buyback - - - - - - - -
------- ------- ------- ------- ------- -------- -------- -------- --------
Ending Balance 295 295 295 295 295 295 295 295 295
Total 14,764 14,764 14,764 14,764 14,764 14,764 14,764 14,764 14,764
======= ======= ======= ======= ======= ======== ======== ======== ========
PaineWebber Incorporated 12 of 18 For Discussion Purposes Only
</TABLE>
<PAGE>
Project Heat
- --------------------------------------------------------------------------------
(in thousands except per share and per unit data)
<TABLE>
<CAPTION>
Star Pro Forma Balance Sheet Scenario I: Base Case
Projected
Estimated --------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Cash $ 10,982 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000
Other Current Assets 75,099 109,247 120,915 132,563 144,182 156,847 170,655 185,713
-------- -------- -------- -------- -------- -------- -------- --------
Total Current Assets 86,081 110,247 121,915 133,563 145,182 157,847 171,655 186,713
PP&E and Intangibles, Net 212,597 221,390 220,754 217,185 210,491 200,667 187,707 171,604
Other Assets 56,902 56,902 56,902 56,902 56,902 56,902 56,902 56,902
-------- -------- -------- -------- -------- -------- -------- --------
Total Assets 355,580 388,539 399,571 407,651 412,576 415,417 416,265 415,219
======== ======== ======== ======== ======== ======== ======== ========
Liabilities:
Current Liabilities 77,481 111,629 123,297 134,945 146,564 159,229 173,038 188,095
8.25% Existing Credit Facility 7,457 7,457 7,457 47,422 87,387 127,352 167,317 207,282
Total LT Debt 300,859 324,355 347,369 325,503 296,647 256,824 204,395 119,688
Other Liabilities 51 51 51 51 51 51 51 51
-------- -------- -------- -------- -------- -------- -------- --------
Total Liabilities 385,848 443,492 478,174 507,921 530,649 543,456 544,801 515,117
Preferred Stock - - - - - - - -
Common Shareholder's Equity (30,268) (54,953) (78,603) (100,271) (118,074) (128,040) (128,536) (99,987)
-------- -------- -------- -------- -------- -------- -------- --------
Total Liabilities and Equity $355,580 $388,539 $399,571 $407,651 $412,576 $415,417 $416,265 $415,219
======== ======== ======== ======== ======== ======== ======== ========
Check - - - - - - - -
Star Pro Forma Cash Flow Statement
Net Income $ 9,272 $ 11,783 $ 17,125 $ 24,394 $ 33,104 $ 43,538 $ 73,638
Depreciation and Amortization 44,778 49,354 52,613 55,888 59,173 62,4682 65,774
Deferred Taxes - - - - - - -
Other Assets/Liabilities - - - - - - -
Change in Non-Cash Working Capital - - 0 - - - -
-------- -------- -------- -------- -------- -------- --------
Cash from Operations 54,050 61,137 69,738 80,282 92,277 106,006 139,412
Maintenance CapEx (6,774) (6,895) (7,194) (7,316) (7,442) (7,572) (7,706)
Internal Growth CapEx (1,797) (1,824) (1,850) (1,878) (1,906) (1,935) (1,965)
External Growth CapEx (45,000) (40,000) (40,000) (40,000) (40,000) (40,000) (40,000)
-------- -------- -------- -------- -------- -------- --------
Cash from Investments (53,571) (48,719) (49,044) (49,194) (49,348) (49,507) (49,671)
Acquisition Borrowing 46,797 46,824 1,850 1,878 1,906 1,935 1,965
Remaining Distributions to Repay Debt (13,284) (18,774) (23,717) (30,734) (41,729) (54,364) (86,671)
Amortization of Existing Debt (5,478) (8,141) (60) (60) (120) - -
Borrowing to Repay Existing Debt 5,478 8,141 60 60 120 - -
Borrowing for Changes in WC - - - - - (0) -
Change in Common Equity - - - - - - -
Distributions (33,957) (35,433) (38,792) (42,196) (43,070) (44,035) (44,999)
-------- -------- -------- -------- -------- -------- --------
Cash from Financing (444) (7,383) (60,659) (71,053) (82,893) (96,464) (129,706)
Net Cash Flow 35 5,035 (39,965) (39,965) (39,965) (39,965) (39,965)
Initial Cash Balance 10,982 1,000 1,000 1,000 1,000 1,000 1,000
-------- -------- -------- -------- -------- -------- --------
Cash Available for Paydown on
WC Revolver and Acq. Facility 11,017 6,035 (38,965) (38,965) (38,965) (38,965) (38,965)
Minimum Cash Balance 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Borrowing/(Paydown) on
WC Revolver and Acq. Facility (10,017) (5,035) 39,965 39,965 39,965 39,965 39,965
-------- -------- -------- -------- -------- -------- --------
Ending Cash Balance 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Net Change in Cash ($9,982) $0 ($0) $0 ($0) $0 ($0)
======== ======== ======== ======== ======== ======== ========
PaineWebber Incorporated 13 of 18 For Discussion Purposes Only
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Project Heat
- --------------------------------------------------------------------------------
(in thousands except per share and per unit data)
Projected
Estimated Normalized ----------------------------------------------------------------
Star Pro Forma Debt Schedule 1998 1998 1999 2000 2001 2002 2003 2004 2005
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Scenario I: Base Case
8.04% 1st Mortgage Notes
Beginning Balance $85,000 $85,000 $85,000 $85,000 $85,000 $85,000 $85,000 $85,000 $85,000
Borrowing - - - - - - - - -
Amortization - - - - - - - - -
------- ------- ------- ------- ------- ------- ------- ------- -------
Ending Balance 85,000 85,000 85,000 85,000 85,000 85,000 85,000 85,000 85,000
Interest Payment 8.04% 6,834 6,834 6,834 6,834 6,834 6,834 6,834 6,834 6,834
7.17% Pearl Notes
Beginning Balance 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000
Borrowing - - - - - - - - -
Amortization - - - - - - - - -
------- ------- ------- ------- ------- ------- ------- ------- -------
Ending Balance 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000
Interest Payment 7.17% 789 789 789 789 789 789 789 789 789
0.00% Other Notes
Beginning Balance - - - - - - - - -
Borrowing - - - - - - - - -
Amortization - - - - - - - - -
------- ------- ------- ------- ------- ------- ------- ------- -------
Ending Balance - - - - - - - - -
Interest Payment 0.00% - - - - - - - - -
8.50% New Debt
Beginning Balance 125,000 125,000 125,000 130,478 138,619 138,679 138,739 138,859 138,859
Borrowing - - 5,478 8,141 60 60 120 - -
Amortization - - - - - - - - -
------- ------- ------- ------- ------- ------- ------- ------- -------
Ending Balance 125,000 125,000 130,478 138,619 138,679 138,739 138,859 138,859 138,859
Interest Payment 8.50% 10,625 10,625 10,858 11,437 11,785 11,790 11,798 11,803 11,803
Exchange of 8.46% Senior
Notes
Beginning Balance - - 66,000 66,000 66,000 66,000 66,000 66,000 66,000
Borrowing 66,000 66,000 - - - - - - -
Amortization - - - - - - - - -
------- ------- ------- ------- ------- ------- ------- ------- -------
Ending Balance 66,000 66,000 66,000 66,000 66,000 66,000 66,000 66,000 66,000
Interest Payment 8.46% 5,584 5,584 5,584 5,584 5,584 5,584 5,584 5,584 5,584
8.00% Acq. & Other Notes
Payable
Beginning Balance 16,798 16,798 13,859 8,381 240 180 120 - -
Borrowing - - - - - - - - -
Amortization (2,939) (2,939) (5,478) (8,141) (60) (60) (120) - -
------- ------- ------- ------- ------- ------- ------- ------- -------
Ending Balance 13,859 13,859 8,381 240 180 120 - - -
Interest Payment 8.00% 1,226 1,226 890 345 17 12 5 - -
8.25% WC Revolver
Beginning Balance - - 7,457 7,457 7,457 47,422 87,387 127,352 167,317
Borrowing for Change
in WC - - - - (0) - - - -
Borrowing/(Payment) - - - - 39,965 39,965 39,965 39,965 39,965
------- ------- ------- ------- ------- ------- ------- ------- -------
Ending Balance - 7,457 7,457 7,457 47,422 87,387 127,352 167,317 207,282
Effective Avg WC Balance 23,600 23,600 21,500 21,500 21,500 21,500 21,500 21,500 21,500
Interest Payment 8.25% 1,947 1,947 1,774 1,774 1,774 1,774 1,774 1,774 1,774
7.50% Acquisition Facility
Beginning Balance - - - 23,496 46,510 24,644 (4,212) (44,035) (96,464)
External Acquisitions - - 40,000 45,000 - - - - -
External Acquisitions
at Beginning of 1999 - - 5,000 - - - - - -
Internal Acquisitions - - 1,797 1,824 1,850 1,878 1,906 1,935 1,965
Payment - - (10,017) (5,035) - - - - -
Remaining Distributions
to Repay Debt - - (13,284) (18,774) (23,717) (30,734) (41,729) (54,364) (86,671)
------- ------- ------- ------- ------- ------- ------- ------- -------
Ending Balance - - 23,496 46,510 26,644 (4,212) (44,035) (96,464)(181,171)
Interest Payment 7.50% $0 $0 $1,069 $2,625 $2,668 $766 ($1,809) ($5,269)($10,411)
PaineWebber Incorporated 14 of 18 For Discussion Purposes Only
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROJECT HEAT
- --------------------------------------------------------------------------------
(in thousands except per share and per unit data) Scenario 1: Base Case
Projected
Estimated Normalized ----------------------------------------------
STAR PRO FORMA DEBT SCHEDULE (CONT'D) 1998 1998 1999 2000 2001 2002 2003
--------- --------- ------- ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Pro Forma Debt
Beginning Balance $237,798 $237,798 308,316 $331,812 $354,826 $372,925 $384,034
Amortization of Existing Debt (2,939) (2,939) (5,478) (8,141) (60) (60) (120)
Borrowing for Changes in WC - - - - (0) - -
Acquisition Borrowing - - 46,797 46,824 1,850 1,878 1,906
Borrowing to Repay Existing Debt - - 5,478 8,141 60 60 120
Remaining Distributions to Repay Debt - - (13,284) (18,774) (23,717) (30,734) (41,729)
Borrowing/(Payment) on WC Revolver and Acq. Facility - - (10,017) (5,035) 39,965 39,965 39,965
-------- -------- ------- -------- -------- -------- --------
Ending Balance 234,859 234,859 331,812 354,826 372,925 384,034 384,176
Interest Expense 27,005 27,005 27,796 29,387 29,450 27,548 24,973
Chase Fees 692 692 692 692 692 692 692
-------- -------- ------- -------- -------- -------- --------
Total Interest Payment 27,697 27,697 28,488 30,079 30,142 28,240 25,665
======== ======== ======= ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
PROJECT HEAT
- --------------------------------------------------------------------------------
(in thousands except per share and per unit data) Scenario 1: Base Case
Projected
----------------------
STAR PRO FORMA DEBT SCHEDULE (CONT'D) 2004 2005
----------------------
<S> <C> <C>
Total Pro Forma Debt
Beginning Balance $384,176 $371,712
Amortization of Existing Debt - -
Borrowing for Changes in WC - -
Acquisition Borrowing 1,935 1,965
Borrowing to Repay Existing Debt - -
Renaming Distributions to Repay Debt (54,364) (86,671)
Borrowing/(Payment) on WC Revolver and Acq. Facility 39,965 39,965
-------- --------
Ending Balance 371,712 326,970
Interest Expense 21,514 16,372
Chase Fees 692 692
-------- --------
Total Interest Payment $22,206 $17,064
========= ========
</TABLE>
15 of 18
<PAGE>
Project Heat
- --------------------------------------------------------------------------------
(in thousands except per share and per unit data)
Scenario I: Base Case
STAR PRO FORMA DISTRIBUTION SCHEDULE OF ACTUAL DISTRIBUTIONS
<TABLE>
<CAPTION>
Projected
Estimated Normalized ----------------------------------------------------------------------
1998 1998 1999 2000 2001 2002 2003 2004 2005
--------- ---------- ------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Distributable Cash
Cash from Operations (excl chg in WC) $29,792 $38,884 $54,050 $61,137 $69,738 $80,282 $92,277 $106,006 $139,412
Maintenance CapEx (6,210) (6,210) (6,774) (6,895) (7,194) (7,316) (7,442) (7,572) (7,706)
Other (384) (384) (35) (35) (35) (35) (35) (35) (35)
------- ------- ------- ------- ------- -------- -------- -------- --------
Total MLP Distributable Cash Flow 23,197 32,289 47,241 54,207 62,509 72,931 84,800 98,399 131,671
Distributable Cash Flow/Unit $1.57 $2.19 $3.20 $3.67 $4.23 $4.94 $5.74 $6.66 $8.92
Structure
Common Unit Ending Balance 10,418 10,418 10,418 10,418 10,418 10,418 10,418 10,418 10,418
SR Subordinated Units 3,296 3,296 3,296 3,296 3,296 3,296 3,296 3,296 3,296
Subordinated Units 754 754 754 754 754 754 754 754 754
General Partner Interest Unit
Equivalent 295 295 295 295 295 295 295 295 295
------- ------- ------- ------- ------- -------- -------- -------- --------
Total Units Outstanding 14,764 14,764 14,764 14,764 14,764 14,764 14,764 14,764 14,764
Distribution Levels $2.20 $2.20 $2.20 $2.20 $2.20 $2.20 $2.20 $2.20 $2.20
MQD $2.20 $2.20 $2.20 $2.20 $2.20 $2.20 $2.20 $2.20 $2.20
First Target $2.42 $2.42 $2.42 $2.42 $2.42 $2.42 $2.42 $2.42 $2.42
Second Target $2.84 $2.84 $2.84 $2.84 $2.84 $2.84 $2.84 $2.84 $2.84
Third Target $3.70 $3.70 $3.70 $3.70 $3.70 $3.70 $3.70 $3.70 $3.70
Indicated Cash Distribution $2.20 $2.20 $2.30 $2.40 $2.60 $2.80 $2.85 $2.90 $2.95
Distribution of MQD
Cash Available 23,197 32,289 47,241 54,207 62,509 72,931 84,800 98,399 131,671
Allocaton to:
Common Units 22,733 22,920 22,920 22,920 22,920 22,920 22,920 22,920 22,920
SR Subordinated Units 0 7,251 7,251 7,251 7,251 7,251 7,251 7,251 7,251
Subordinated Units 0 1,472 1,659 1,659 1,659 1,659 1,659 1,659 1,659
General Partner Interest 464 646 650 650 650 650 650 650 650
First Target Distribution
Cash Available 0 0 14,761 21,727 30,028 40,450 52,319 65,919 99,190
Cash Required for Target
Distribution 0 0 3,248 3,248 3,248 3,248 3,248 3,248 3,248
Cash Required for Indicated
Distribution 0 0 1,476 2,953 5,905 8,858 9,596 10,335 11,073
Actual Cash Distributed 0 0 1,476 2,953 3,248 3,248 3,248 3,248 3,248
Allocation to:
Common Units 0 0 1,042 2,084 2,292 2,292 2,292 2,292 2,292
SR Subordinated Units 0 0 330 659 725 725 725 725 725
Subordinated Units 0 0 75 151 166 166 166 166 166
General Partner Interest 0 0 30 59 65 65 65 65 65
Total Distribution to:
Common Units 0 0 1,042 2,084 2,292 2,292 2,292 2,292 2,292
SR Subordinated Units 0 0 330 659 725 725 725 725 725
Subordinated Units 0 0 75 151 166 166 166 166 166
General Partner Interest 0 0 30 59 65 65 65 65 65
PaineWebber Incorporated 16 of 18 For Discussion Purposes Only
</TABLE>
<PAGE>
Project Heat
- --------------------------------------------------------------------------------
(in thousands except per share and per unit data)
Scenario I: Base Case
STAR PRO FORMA DISTRIBUTION SCHEDULE OF ACTUAL DISTRIBUTIONS (cont'd)
<TABLE>
<CAPTION>
Projected
Estimated Normalized ----------------------------------------------------------------------
1998 1998 1999 2000 2001 2002 2003 2004 2005
--------- ---------- ------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Second Target Distribution
Cash Available 0 0 0 0 26,780 37,202 49,071 62,671 95,942
Cash Required for Target
Distribution 0 0 0 0 7,149 7,149 7,149 7,149 7,149
Cash Required for Indicated
Distribution 0 0 0 0 3,064 6,468 7,319 8,170 9,022
Actual Cash Distributed 0 0 0 0 3,064 6,468 7,149 7,149 7,149
Allocation to:
Common Units 0 0 0 0 1,875 3,959 4,376 4,376 4,376
SR Subordinated Units 0 0 0 0 593 1,252 1,384 1,384 1,384
Subordinated Units 0 0 0 0 136 287 317 317 317
General Partner Interest 0 0 0 0 61 129 143 143 143
Incentive Right 0 0 0 0 398 841 929 929 929
Incentive Right to GP Interest 0 0 0 0 96 203 224 224 224
Incentive Right to Sr. Sub Units 0 0 0 0 302 638 705 705 705
Total Distribution to:
Common Units 0 0 0 0 1,875 3,959 4,376 4,376 4,376
SR Subordinated Units 0 0 0 0 895 1,890 2,089 2,089 2,089
Subordinated Units 0 0 0 0 136 287 317 317 317
General Partner Interest 0 0 0 0 157 332 367 367 367
Third Target Distribution
Cash Available 0 0 0 0 0 0 41,922 55,522 88,793
Cash Required for Target
Distribution 0 0 0 0 0 0 16,591 16,591 16,591
Cash Required for Indicated
Distribution 0 0 0 0 0 0 193 1,157 2,122
Actual Cash Distributed 0 0 0 0 0 0 193 1,157 2,122
Allocation to:
Common Units 0 0 0 0 0 0 104 625 1,146
Sr. Subordinated Units 0 0 0 0 0 0 33 198 363
Subordinated Units 0 0 0 0 0 0 8 45 83
General Partner Interest 0 0 0 0 0 0 4 23 42
Incentive Right 0 0 0 0 0 0 44 266 488
Incentive Right to GP Interest 0 0 0 0 0 0 11 64 118
Incentive Right to Sr. Sub Units 0 0 0 0 0 0 34 202 370
Total Distribution to:
Common Units 0 0 0 0 0 0 104 625 1,146
Sr. Subordinated Units 0 0 0 0 0 0 67 400 733
Subordinated Units 0 0 0 0 0 0 8 45 83
General Partner Interest 0 0 0 0 0 0 15 87 160
Remaining Distribution
Cash Available 0 0 0 0 0 0 0 0 0
Cash Required for Indicated
Distribution 0 0 0 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0 0 0 0
Incentive Right 0 0 0 0 0 0 0 0 0
Incentive Right to GP Interest 0 0 0 0 0 0 0 0 0
Incentive Right to Sr. Sub Units 0 0 0 0 0 0 0 0 0
Repay Indebtedness 0 0 13,284 18,774 23,717 30,734 41,729 54,364 86,671
Total Distribution to:
Common Units 0 0 0 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0 0 0 0
PaineWebber Incorporated 17 of 18 For Discussion Purposes Only
</TABLE>
<PAGE>
PROJECT HEAT
================================================================================
(in thousands except per share and per unit data)
<TABLE>
<CAPTION>
STAR GAS PRO FORMA SCHEDULE OF ACTUAL DISTRIBUTIONS (cont'd) Scenario I: Base Case
Estimated Normalized Projected
-----------------------------------------------------------------
1998 1998 1999 2000 2001 2002 2003 2004 2005
---------- ---------- -------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Distributions
- -------------------
Common Units $ 22,733 $ 22,910 $ 23,962 $ 25,004 $ 27,088 $ 29,171 $ 29,692 $ 30,213 $ 30,734
SR Subordinated Units 0 7,251 7,581 7,910 8,872 9,867 10,132 10,465 10,798
Subordinated Units 0 1,472 1,734 1,810 1,961 2,112 2,149 2,187 2,225
General Partner Interest 464 646 679 709 872 1,047 1,097 1,169 1,242
-------- ---------- -------- -------- -------- -------- -------- -------- --------
Total Distributions $ 23,197 $ 32,289 $ 32,957 $ 35,433 $ 38,792 $ 42,196 $ 43,070 $ 44,035 $ 44,999
======== ========== ======== ======== ======== ======== ======== ======== ========
Total Distributions Per Units
- -----------------------------
Common Units $ 2.18 $ 2.20 $ 2.30 $ 2.40 $ 2.60 $ 2.80 $ 2.85 $ 2.90 $ 2.95
SR Subordinated Units 0.00 2.20 2.30 2.40 2.69 2.99 3.07 3.18 3.28
Subordinated & GP Units 0.44 2.02 2.30 2.40 2.70 3.01 3.09 3.20 3.30
Total Incentive Distributions NPV
--------
To GP Interest $ 357 $ 0 $ 0 $ 0 $ 0 $ 96 $ 203 $ 235 $ 289 $ 342
To Sr. Sub Units 1,121 - - - - 302 638 739 907 1,075
-------- -------- ---------- -------- -------- -------- -------- -------- -------- --------
Sub-Total 1,478 - - - - 398 841 974 1,196 1,417
Present Value of
Terminal Value 1,189 - - - - - - - - 5,670
--------
Total $ 2,667
</TABLE>
18 of 18
<PAGE>
FOR DISCUSSION PURPOSES ONLY 5/4 DRAFT
PRELIMINARY STATUS REPORT
BOARD OF DIRECTORS
STAR GAS PARTNERS, L.P.
Petro management and its advisors have been working on a proposed
transaction between Petro and Star for over a year. Star Committee has engaged
Baker & Botts, LLP as its counsel and A.G. Edwards & Sons, Inc. as its financial
advisor. After one month of preliminary due diligence and review, the Committee
and its advisors better understand and appreciate the complexity of the proposed
transaction and the amount of hard work and creativity dedicated to this
proposal.
During the past year, both parties have experienced management changes and
adverse weather conditions. During this period, Petro has suspended its common
dividends and its publicly held common shares have traded down. Star's publicly
held common units have traded flat to slightly up, but Star has made
distributions to its common unitholders and its subordinated unitholders (that
is, Petro) even though such distributions exceeded distributable cash flow (that
is, Star returned capital). The Star Committee notes that Petro's capital
constraints have effectively eliminated its historic acquisition program while
Star has demonstrated a far more viable acquisition program.
In light of these and other significant changes in relative performance,
market conditions and strategic rationale for the proposed transaction, the Star
Committee (after considering the preliminary report of A.G. Edwards and
consulting with counsel), proposes a re-examination, restructuring and repricing
of the proposed transaction between Petro and Star.
Subject to further diligence and assuming no material adverse changes in
the parties or in market conditions, the Star Committee proposes:
(A) Star Partnership Agreement. Appropriate steps should be initiated
--------------------------
to amend the Star Partnership Agreement as of the closing date
(assumed to be September 30, 1998) in order to:
(A-1) raise the future required minimum quarterly distribution ("MQD")
for common unitholders from $2.20 per annum to $2.30 per annum;
(A-2) authorize a new class of senior subordinated units which shall
be junior to all present and future common units, but senior to
the present subordinated units; and
(A-3) prohibit the payment of any future distributions to senior
subordinated unitholders and to subordinated unitholders except
from net distributable cash
<PAGE>
flow available for such period after first paying MQD to the
common unitholders for such period plus any cumulative common
unit arrearages.
(B) Definitive Transaction Agreement. A draft of the definitive
--------------------------------
transaction agreement should be prepared by Petro for Star Committee's
careful consideration (and for future submission to the Board of
Directors and common unitholders of Star and to the Board of Directors
and shareholders of Petro for approval) setting forth the following
steps:
(B-1) At closing of the Transaction, Star shall be obligated to pay to
Petro or assume from Petro a "Maximum Aggregate Consideration"
of [$390 million] consisting of (A) the total consideration paid
to Petro's common shareholders calculated at [26,563,000] Petro
common shares at [$ _________] per share; (B) the principal
amount of Petro's total debt and preferred stock outstanding
just prior to closing and any refinancing of such debt or
preferred stock; and (C) any premiums paid above and beyond the
principal amount of such debt and preferred stock to redeem,
exchange, defease or otherwise cancel these liabilities. In
addition, the distributions made to the Petro common
shareholders and the refinancing of any assumed debt or
preferred stock may not result in more than [10,300,000] common
units outstanding at closing and must result in at least [$125
million] of new debt carrying an interest rate of no greater
than [8.50%] having been closed prior to, or simultaneous with,
the closing of this Transaction.
(B-2) Prior to the closing of the Transaction, in return for the
Maximum Aggregate Consideration defined in (B-1), Petro shall
represent, warrant and agree that:
(A) Petro shall set up appropriate reserves and fund the
following:
(1) off-balance sheet pension liabilities of [$5 million],
(2) off-balance sheet tax liabilities relating to Pearl of
[$3.5 million],
(3) surplus cash available for distributions equal to
[$1.10] per new common unit issued,
(4) all of the Transaction costs, including the gross
spread on Star's new MLP equity and debt; financial
advisory fees and fairness opinions for Petro and Star;
legal, accounting and printing fees for Petro and Star;
all exchange and solicitation fees related to the
retirement or redemption of Petro's debt and preferred
stock; all appraisals and environmental reports; all
rating agencies and bank fees; and all other out-of-
pocket costs and expenses associated with the
Transaction, and
(5) any "Unearned MQD" monies that Petro wishes to have
available for payment to senior subordinated or
subordinated unitholders following the closing of the
Transaction.
(B) Petro shall have no borrowed money debt of any kind
outstanding other than any such amounts included in (B-1);
<PAGE>
(C) Petro shall have no preferred stock of any kind outstanding
other than any such amounts included in (B-1);
(D) Petro shall have transferred to Star a minimum of
[2,000,000] of its subordinated units free and clear for
cancellation;
(E) Petro shall have a minimum balance of cash of [$500,000], a
positive working capital balance (subject to further due
diligence), and a total common shareholders' deficit on its
balance sheet of no greater than [$_______million], all as
of the closing.
(B-3) In the event Petro is unable or unwilling to represent and
warrant each of the matters set forth in (B-2), then the Maximum
Aggregate Consideration set forth in (B-1) shall be reduced on a
dollar-for-dollar basis.
<PAGE>
Round II
Appendices to
Preliminary Report to
The Special Committee of Gas
Analyses Performed at $2.00 Per Share
A. G. Edwards & Sons, Inc.
INVESTMENT BANKING
May 4, 1998
<PAGE>
Overview of Oil
EBITDA Reconciliation: 1997 //(a)//
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Oil
---
<S> <C> <C>
1997 Actual EBITDA $36,010
NORMALIZING ADJUSTMENTS:
Weather was 3.8% warmer than 30-year normal
3.8% of 1997 budgeted retail gallons 13,482 gallons
Gross profit margin $0.4545
Delivery and garage cost savings ($0.0814)
-------
Net impact per gallon $0.3731
$ impact 5,030
Insurance reserve 2,000
-------
1997 Adjusted EBITDA $43,040
=======
</TABLE>
- --------------------------------------------------------------------------------
(a) Management's assumptions.
Page 1
<PAGE>
Overview of Oil
EBITDA Reconciliation: 1997-1998 (a)
(continued)
<TABLE>
<CAPTION>
Oil
---
<S> <C> <C>
1997 Adjusted EBITDA $43,040
Volume Adjustments for 1998
Sale of TLC Division in 1997 (16,926) gallons
Attrition in 1998 (4.1%) (17,375)
1997 Acquisitions 9,828
-------
(24,473) gallons
@
$0.1700/gallon (b) (4,159)
Gross Profit Margin Increase $0.006 per gallon on 395,086 gallons (c) 2,371
Inflation (3,662)
Operating Cost Reductions (d) 5,850
-------
1998 EBITDA Budget $43,440
=======
</TABLE>
- --------------------------------------------------------------------------------
(a) Management's assumptions.
(b) Represents the average gross profit per gallon ($.4700 per gallon) offset
by $.30 per gallon reduction in operating expenses.
(c) Actual gross profit margin increase achieved in first quarter of 1998 was
$5.9 million (156 million gallons @ $0.037/gallon).
(d) Represents already accomplished reductions in branch, regional and
corporate expenses in excess of normal indexing related to volume
reductions as well as 1% productivity improvements.
Page 2
<PAGE>
Overview of Oil
EBITDA Reconciliation: 1998 (a)
(continued)
<TABLE>
<CAPTION>
Oil
---
<S> <C>
1998 EBITDA Budget $43,440
Actual Differential between first three months
of Fiscal 1998 vs. Budget (9,318)
Revised margin improvement and cost savings
estimates based on first three months of
Fiscal 1998 vs. Budget. 4,318
-------
Adjusted 1998 EBITDA Budget $38,440
=======
</TABLE>
- --------------------------------------------------------------------------------
(a) Management's assumptions.
Page 3
<PAGE>
OVERVIEW OF OIL
EBITDA RECONCILIATION: 1998-1999 (a)
(continued)
<TABLE>
<CAPTION>
OIL
---
<S> <C>
1998 EBITDA Budget $43,440
Internal Attrition (4.1%) and other adjustments (3,897)
Acquisition Growth
$30,000 of acquisitions at 4.75x multiple 6,315
-------
1999 Projection $45,858
=======
</TABLE>
- --------------------------------------------------------------------------------
(a) Management's assumptions.
Page 4
<PAGE>
OVERVIEW OF OIL
EBITDA SUMMARY
<TABLE>
<CAPTION>
OIL
---
<S> <C>
1997 Actual $36,010
1997 Adjusted 43,040
1998 Budget $43,440
Adjusted 1998 Budget $38,440
1999E $45,858
</TABLE>
- --------------------------------------------------------------------------------
Page 5
<PAGE>
OVERVIEW OF GAS
EBITDA RECONCILIATION: 1997 (a)
($ in thousands)
<TABLE>
<CAPTION>
GAS
---
<S> <C>
1997 Actual EBITDA $19,703 (b)
NORMALIZING ADJUSTMENTS:
Weather
Residential - 1,125 gallons @ 0.7106 margin 799
Commercial - 277 gallons @ 0.4459 margin 124
Margin
Residential - 50,832 gallons @ (0.7106-0.6995) (564)
Commercial - 19,864 gallons @ (0.4454-0.4348) (220)
Wholesale - 38,404 gallons @ (0.0975-0.0675) (1,152)
Compensation (56)
Elimination of strategic expense 902 (c)
Pearl Gas EBITDA 3,012
Pearl Gas acquisition adjustments 273 (d)
-------
1997 Adjusted EBITDA $22,821
=======
</TABLE>
- --------------------------------------------------------------------------------
(a) Management's assumptions.
(b) Not pro forma for Pearl Gas acquisition.
(c) Certain expenses including the exploration of strategic alternatives by
Morgan Stanley.
(d) Certain cost savings, primarily salary and benefit expenses of certain
selling shareholders.
Page 6
<PAGE>
OVERVIEW OF GAS
EBITDA RECONCILIATION: 1997-1999 (a)
($ IN THOUSANDS)
(continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
GAS
---
<S> <C>
1998 EBITDA Budget $22,781
Actual Differential between first six months
of Fiscal 1998 vs. Budget (4,502)
-------
Adjusted 1998 EBITDA Budget $18,279
=======
1998 EBITDA Budget $22,781
Internal Growth of 1.7% 379
Acquisition Growth
$20 million of acquisitions at 7x multiple
completed on 9/30/98 2,857
$10 million of acquisitions at 7x multiple
completed on 4/1/99 713
-------
1999 EBITDA Projection $26,730
=======
</TABLE>
- --------------------------------------------------------------------------------
(a) Management's assumptions.
Page 7
<PAGE>
Summary of Transaction
Pro Forma Gas Units Outstanding
(in thousands)
To simplify the
complexity of the steps
in the Transaction,
A.G. Edwards prepared
a summary of its
understanding.
[_] There are currently 6,355 Gas units outstanding comprised of 3,832 common
units, 2,396 subordinated units and 127 general partner ("GP") units. The
subordinated units and GP units are assets of Oil.
[_] There are currently 26,563 shares of Oil common stock outstanding,
comprised of public shareholders and "insiders." The public holds 17,160
Class A shares. The "insiders" hold 9,404 shares which include 6,795 Class
A shares, 11 Class B shares and 2,598 Class C shares.
[_] Each shareholder of Oil will receive a certain number of units in Gas such
that the implied consideration paid for each Oil share is $2.00.
[_] The publicly held 17,160 Class A shares will receive .1000 shares of newly
created senior subordinated units (1,716 units in total) with an implied
value of $20.00/unit. This represents an implied purchase price of
$2.00/share for an implied total purchase price of $34.3 million.
[_] The "insiders" of Oil, who hold a total of 9,404 shares (comprised of A, B
and C shares) will also receive $2.00/share for a total of $18.8 million.
The consideration received by these shareholders will be funded by:
- (1) the distribution of existing units of Gas which are currently owned
by Oil
[_] all of the 127 GP units owned by Oil will be given as
consideration at an implied value of $21.62/unit, for a total of
$2.7 million.
[_] 373 of the 2,396 subordinated units owned by Oil will be given as
consideration at an implied value of $16.58/unit, for a total of
$6.2 million.
- (2) the distribution of newly-created units of Gas
[_] to fund the remaining $9.9 million of the $18.8 million due to
the Oil "insiders", Gas will issue 350 newly-created senior
subordinated units and 133 newly-created GP units. The implied
values for these new units are $20.00 and $21.62, respectively.
Page 8
<PAGE>
Summary of Transaction
Pro Forma Gas Units Outstanding
(in thousands)
(continued)
[_] Of the 2,396 Subordinated units and 127 GP units owned by Oil, only 2,023
subordinated units will not have been used as consideration paid to the
"inside" Oil shareholders. Hence, these 2,023 subordinated units will be
retired by Gas. A.G. Edwards has assumed that the implied value of these
units are $16.58/unit for a total retired value of approximately $33.5
million.
Page 9
<PAGE>
Summary of Gas Units Outstanding
Pre-Financing Assumptions
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Distributed to Oil Issued to Oil
---------------------- ------------------------
Type of Units Current Public Insiders Public Insiders Retired Pro Forma
- ----------------- ------- ------ ---------- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Common 3,832 - - - - - 3,832
Senior Subordinated - - - 1,716 350 - 2,066
Subordinated 2,396 - 373 - - (2,023) 373
General Partner (a) 127 - 127 - 133 - 260
------- -----------
6,355 6,531
</TABLE>
___________________________________
(a) The number of GP units issued reflect the assumption of a 6,461 common unit
equity offering to refinance certain of the assumed Oil debt. Hence, the
number of GP units reflected in the pro forma column do not equal 2% of the
pro forma outstanding units shown above but do equal exactly 2% of the pro
forma units outstanding on a post financing basis.
Page 10
<PAGE>
EQUITY PURCHASE PRICE CALCULATION
IMPLIED EQUITY VALUE OF OIL'S ASSETS
(units in thousands, $ in millions, except per unit amounts)
<TABLE>
<CAPTION>
Purchase Price of Oil's Equity Purchase Price of Oil's Equity
---------------------------------- -------------------------------------
Value of Securities Equity Value of Oil's Value of Oil's GP and
Event Paid to Oil Shareholders Heating Oil Assets Subordinated Units in Star
- --------------------------------- ------------------------------ ---------------------- -----------------------------
<S> <C> <C> <C>
Issuance of Senior Subordinated
Units to Public Oil Shareholders 1,716 x $20.00
---------------------
$34.4 $34.3 -
Distribution of General Partner
Units to Inside Oil Shareholders 127 x $21.62
---------------------
$2.7 - $2.7
Distribution of Subordinated
Units to Inside Oil Shareholders 373 x $16.58
---------------------
$6.2 - $6.2
Issuance of General Partner
Units to Inside Oil Shareholders 133 x $21.62
---------------------
$2.9 $2.9 -
Issuance of Senior Subordinated
Units to Inside Oil Shareholders 350 x $20.00
---------------------
$7.0 $7.0 -
Retire Subordinated Units ($33.5) 2,023 x $16.58
------------------
$33.5
$10.7 $42.5
------- -----------------------------
Total $53.1 $53.1
</TABLE>
Divided by 26,563 shares of Oil's Common stock= $2.00 per share
Page 11
<PAGE>
PREMIUM PAID ANALYSIS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
Dollars
Stock Price Premium Analysis in thousands Notes
-------------------------------------------- --------------- ----------------------------------------------------------
<S> <C> <C>
Equity purchase price of Oil $53,126 $2.00 share price x 26,563 shares.
Premium to stock price one day prior 23.1% $1.625 close on April 22, 1998.
Premium to stock price one month prior 28.0%
Premium to stock price three months prior -20.0%
Premium to stock price six months prior -36.0%
Purchase Price
--------------------------------------------
Equity purchase price of heating oil assets $ 10,657 See page 11.
Debt assumption value (b) 338,223
---------------
Aggregate purchase price of heating oil
assets $348,880
===============
</TABLE>
<TABLE>
<CAPTION>
Multiples
-------------------------------------------- ------------------
Multiples Notes
------------------ -----------------------------------
<S> <C> <C> <C>
1997 Revenue $548,141 0.6 x As a multiple of aggregate
transaction value.
1997 EBITDA (c) 36,010 9.7 As a multiple of aggregate
transaction value.
1997 EBIT (d) 6,264 55.7 As a multiple of aggregate
transaction value.
1997 Net loss to common shares (d) ($ 19,338) NM As a multiple of equity value.
Equity (e) (177,033) NM As a multiple of equity value.
1997 Adjusted EBITDA (c) 43,040 8.1 x As a multiple of aggregate
transaction value.
1998 EBITDA budget (c) 43,440 8.0 As a multiple of aggregate
transaction value.
Adj. 1998 EBITDA budget (c) 38,440 9.1 As a multiple of aggregate
transaction value.
1999P EBITDA (c) 45,858 7.6 As a multiple of aggregate
transaction value.
==================
</TABLE>
________________________________________________________
(a) Updated through April 22, 1998.
(b) Includes cost of debt at assumed redemption value, preferred stock at
assumed redemption value, transaction fees, and certain off-balance
sheet liabilities, net of excess cash. See page 13.
(c) Calculated as gross profit minus SG&A expense and direct delivery
expense.
(d) Excludes restructuring charge, pension curtailment expense, provision
for supplemental benefits and corporate identity expenses.
(e) As of 12/31/97.
Page 12
<PAGE>
Transaction Multiple Analysis
Firm Valuation
<TABLE>
<S> <C> <C> <C>
Equity Purchase Price of Heating Oil Assets $ 10,656,580
-------
+ Cost of Debt at Redemption Value 290,992,000
+ Cost of Preferred stock at Redemption Value 34,375,000
+ Transaction Fees 19,104,000
------- 338,223,100
+ Off-Balance Sheet Pension and Tax Liability 8,500,000
- Excess Cash
Oil's cash balance at 9/30/98(a) 22,355,000
Required cash on hand (500,000)
Additional Surplus (b) (7,107,100) 14,747,900
-------
------------
Firm Value $348,879,680
============
</TABLE>
___________________
(a) Includes cash collateral of $9,350,000.
(b) Assumes an Additional Surplus of $1.10 per new common unit issued is funded
by Oil.
Page 13
<PAGE>
Transaction Multiple Analysis
Transaction Multiples for Firm Valuation
<TABLE>
<CAPTION>
EBITDA
-------------------------------------
Purchase Price Year Amount Multiple Paid
- -------------- -------------------- ------------- -------------
<S> <C> <C> <C>
$348,879,680 1997 Adjusted $43,040,000 8.1x
$348,879,680 Adjusted 1998 Budget $38,440,000 9.1x
$348,879,680 1999 Projected $45,858,000 7.6x
</TABLE>
Page 14
<PAGE>
Transaction Multiple Analysis
Distribution of Value
- --------------------------------------------------------------------------------
OIL
1997 Adjusted EBITDA
EBITDA Multiple Purchase Price
- ------------- -------- --------------
$43,040,000 8.1x $348,879,680
<TABLE>
<CAPTION>
Ability to Further Consolidate Heating Oil Industry Core Business
- --------------------------------------------------- -------------
<S> <C> <C> <C> <C>
Acquisition EBITDA $43,040,000
EBITDA Multiple Purchase Price EBITDA Decline Rate 7.75% (a)
- ------------ ------------- --------------
WACC 7.78% (b)
$6,315,789 4.75x $30,000,000
Decline Rate 7.75% (a)
WACC 7.78% (b)
Perpetuity $40,663,681
Purchase Price $30,000,000
--------------
Net Present Value of the Heating Oil Acq. $10,663,681
Value in perpetuity of Ability to
-------------- -------------
Consolidate Heating Oil Industry $137,034,135 Value of Core Business $277,109,433
============== =============
---------------+----------------------------------
_________________________________________________________________________
Implied Total Valuation $414,143,568
% of Valuation attributable to core business 66.9%
% of Valuation attributable to consolidation opportunities 33.1%
_________________________________________________________________________
</TABLE>
(a) A.G. Edwards' estimate of the decline rate of EBITDA based on a 4.1%
attribution rate.
(b) See page 25.
Page 15
<PAGE>
Transaction Multiple Analysis
Transaction Multiples for Existing Heating Oil Business
- --------------------------------------------------------------------------------
Revised EBITDA
---------------------------------
Purchased Price (a) Year Amount Multiple Paid
- ------------------- -------------- ------------- ---------------
$233,440,425 1997 Adjusted $43,040,000 5.4x
$233,440,425 Adjusted 1998 Budget $38,440,000 6.1x
$233,440,425 1999 Projected $45,858,000 5.1x
- --------------------------------------------------------------------------------
(a) Represents A.G Edwards' estimate of the portion of the $348.9 million price
being paid for Oil's heating oil business that can be attributable to its
core business. Calculation: $348.9 million x 66.9%. See page 15.
Page 16
<PAGE>
Relative Contribution Analysis (a)
($ in thousands)
Gas' EBIDTA Contribution
96-97 35.4%
[CHARTS APPEARS HERE]
98-99 38.4%
96-99 35.1%
For Gas' contribution
of approximately 35% of
the combined entity's
EBITDA, it will receive
approximately 40% of the
implied firm value.
___________________________________
(a) For purposes of its analysis, A.G. Edwards converted Oil's historical
December 31st fiscal year-end to a September 30th fiscal year-end for
comparison purposes. Oil's projections are based on a December 31st
calendar year end. Other measures of relative contribution analysis are
non-meaningful.
(b) Includes only heating oil EBITDA for Oil.
(c) Firm value for all of Oil.
(d) Implied firm value of only Oil's heating oil assets.
Page 17
<PAGE>
ACCRETION/DILUTION ANALYSIS
VARIATIONS IN MARGIN GROWTH RATES AND ACQUISITION ASSUMPTIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
4.1% ATTRITION 4.1% ATTRITION 4.1% ATTRITION
GAS $0.00 MARGIN GROWTH $0.00 MARGIN GROWTH $0.005 MARGIN GROWTH
STAND-ALONE $30.0MM AT 4.75X ACQUISITIONS $30.0MM AT 5.25X ACQUISITIONS $30.0MM AT 4.75X ACQUISITIONS
----------- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C>
DCF PER UNIT
1998E (a) $1.220 $1.770 $1.770 $1.770
1998N (b) 1.930 2.500 2.500 2.500
1999P 2.090 2.780 2.740 2.940
ACCRETION/DILUTION
1998E (a) 45.1% 45.1% 45.1%
1998N (b) 29.5% 29.5% 29.5%
1999P 33.0% 31.1% 40.7%
COMMON UNIT
COVERAGE
1998E (a) 0.90x 1.00x 1.00x 1.00x
1998N (b) 1.42 1.41 1.41 1.41
1999P 1.48 1.50 1.47 1.58
TOTAL UNIT
COVERAGE
1998E (a) 0.55x 0.81x 0.81x 0.81x
1998N (b) 0.88 1.14 1.14 1.14
1999P 0.95 1.21 1.19 1.28
LEVERAGED UNIT
COVERAGE (C)
1998E (a) 0.94x 1.00x 1.00x 1.00x
1998N (b) 1.21 1.18 1.18 1.18
1999P 1.24 1.22 1.21 1.26
<CAPTION>
4.1% ATTRITION
$0.005 MARGIN GROWTH
$30.0MM AT 5.25X ACQUISITIONS
-----------------------------
<S> <C>
DCF PER UNIT
1998E (a) $1.770
1998N (b) 2.500
1999P 2.890
ACCRETION/DILUTION
1998E (a) 45.1%
1998N (b) 29.5%
1999P 38.3%
COMMON UNIT
COVERAGE
1998E (a) 1.00x
1998N (b) 1.41
1999P 1.55
TOTAL UNIT
COVERAGE
1998E (a) 0.81x
1998N (b) 1.14
1999P 1.26
LEVERAGED UNIT
COVERAGE (C)
1998E (a) 1.00x
1998N (b) 1.18
1999P 1.25
</TABLE>
- ------
(a) 1998 estimate assumes no acquisitions for either company, and is adjusted
to reflect actual results through 3/31/98.
(b) 1998 budgeted.
(c) Defined as (DCF+Int)/[((GP units + common units)*MQD) + Int)]
PAGE 18
<PAGE>
PUBLIC COMPANY ANALYSIS
[_] A.G. Edwards compared certain financial and market information of Gas on a
historical and pro forma basis to that of certain public master limited
partnerships which A.G. Edwards deemed relevant for the purposes of this
analysis. A.G. Edwards reviewed the trading multiples from a total of 6
public propane master limited partnerships.
[_] The selected propane master limited partnerships are as follows:
- AmeriGas Partners, L.P. - Heritage Propane Partners, L.P.
- Cornerstone Propane Partners, L.P. - National Propane Partners, L.P.
- Ferrellgas Partners, L.P. - Suburban Propane Partners, L.P.
[_] No company used in the analysis is identical to Gas.
<TABLE>
<CAPTION>
PUBLIC COMPARABLE COMPANIES (a)
- ------------------------------------------------------------------------------------------------------------
PUBLIC PUBLIC
PRO FORMA COMPANY COMPANY
GAS GAS MEDIANS RANGES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Yield 10.0% 10.5% 9.6% 8.5% to 10.6%
Firm value/LTM EBITDA 12.7x (b) 10.2x (b) 12.5x 9.8x to 16.7x
Firm value/1998 normalized EBITDA 8.7x (c) 8.0x (c) 11.5x 10.3x to 13.7x
Equity Market Cap/LTM DCF 18.0x (d) 12.4x (d) 15.7x 9.4x to 25.5x
Equity Market Cap/1998 normalized DCF 9.7x (e) 7.9x (e) 13.9x 11.6x to 16.9x
LTM common unit coverage 0.9x (f) 1.0x (f) 1.4x 0.6x to 1.5x
1998E common unit coverage 1.5x (g) 1.5x (g) 1.4x 0.9x to 1.9x
LTM total unit coverage 0.6x (f) 0.8x (f) 0.7x 0.4x to 1.0x
1998E total unit coverage 1.0x (g) 1.2x (g) 0.7x 0.7x to 1.0x
1998E leveraged unit coverage 1.2x (g) (h) 1.2x (g) (h) 1.1x 0.9x to 1.3x
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Public comparable companies include: APU, CNO, PGP, HPG, CNL and SPH.
(b) Firm value/adjusted 1998 budget EBITDA.
(c) Firm value/1999 estimated EBITDA.
(d) Equity market cap/adjusted 1998 budget EBITDA.
(e) Equity market cap/1999 estimated DCF.
(f) Adjusted 1998 budget.
(g) 1999 estimates.
(h) Defined as (DCF + interest)/(((GP units + common units)*MQD) + interest).
Page 19
<PAGE>
PUBLIC COMPANY ANALYSIS
($ IN MILLIONS, EXCEPT PER UNIT DATA)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Closing Implied Implied
Price on Market Value Firm Distribution
Company Ticker (4/22/98) of Equity Value per Unit Yield
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gas (a) $21.938 $ 139.4 $ 232.0 $2.20 10.0%
AmeriGas Partners, L.P. APU 25.938 1,108.6 1,867.2 2.20 8.5%
Cornerstone Propane Partners, L.P. (d) CNO 22.688 455.7 671.7 2.16 9.5%
Ferrellgas Partners, L.P. (e) FGP 20.875 666.6 1,192.3 2.00 9.6%
Heritage Propane Partners, L.P. HPG 23.125 197.8 371.8 2.00 8.6%
National Propane Partners, L.P. NPL 20.313 232.9 375.6 2.10 10.3%
Suburban Propane Partners, L.P. (f) SPH 18.813 551.4 942.0 2.00 10.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Mean 9.5%
Median 9.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma $21.938 $ 285.0 (g) $ 583.8 (h) $2.30 10.5%
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Common LTM Distributable Cash Flow/
----------------------------
Units/ Distribution to Distribution FY98E
Company Ticker Total Units Common Units to Total Units DCF/unit
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gas (a) 60.3% 0.9x (b) 0.6x (b) $ 2.09 (c)
AmeriGas Partners, L.P. APU 52.8% 1.5x 0.8x 2.14
Cornerstone Propane Partners, L.P. (d) CNO 66.5% 0.6x 0.4x 1.47
Ferrellgas Partners, L.P. (e) FGP 47.0% 1.4x 0.7x 1.34
Heritage Propane Partners, L.P. HPG 55.8% 1.3x 0.8x 2.01
National Propane Partners, L.P. NPL 59.6% 0.9x 0.5x 1.60
Suburban Propane Partners, L.P. (f) SPH 75.1% 1.4x 1.0x 1.41
- ------------------------------------------------------------------------------------------------------------------------------------
Mean 59.5% 1.2x 0.7x
Median 57.7% 1.4x 0.7x
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma 79.2% 1.0x (b) 0.8x (b) 2.78 (c)
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
FY98E Distributable Cash Flow /
-------------------------------
Distribution to Distribution
Company Ticker Common Units to Total Units
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gas (a) 1.5x(c) 1.0x(c)
AmeriGas Partners, L.P. APU 1.9x 1.0x
Cornerstone Propane Partners, L.P. (d) CNO 1.1x 0.7x
Ferrell gas Partners, L.P. (e) FGP 1.4x 0.7x
Heritage Propane Partners, L.P. HPG 1.8x 1.0x
National Propane Partners, L.P. NPL 1.3x 0.8x
Suburban Propane Partners, L.P. (f) SPH 0.9x 0.7x
- -----------------------------------------------------------------------------------------------------------
Mean 1.4x 0.8x
Median 1.4x 0.7x
- -----------------------------------------------------------------------------------------------------------
Pro Forma 1.5x (c) 1.2x (c)
</TABLE>
_________________________________
1998 estimates per A.G. Edwards' research, except for Gas, Oil and Pro Forma.
Implied Firm Value equals common, subordinated and GP units, multiplied by the
market price of common units plus debt, less cash.
(a) Pro forma for the Pearl Gas acquisition and the common unit offering.
Fiscal 1997 maintenance capital expenditure used as LTM figure.
(b) For Gas and Pro forma only, LTM DCF figures are adjusted 1998 budget DCF
estimates.
(c) For Gas and Pro forma only, FY98E DCF figures are 1999 DCF estimates.
(d) Financial information pro forma for common unit offering. Maintenance
capital expenditures assumed to be 8% of EBITDA due to lack of disclosure.
(e) Maintenance capital expenditures assumed to be 8% of EBITDA due to lack of
disclosure.
(f) Financial figures exclude $5.1 million gain from sale of minority interest.
(g) 12.992 units @ $21.9375.
(h) $285.0 in equity plus $308.316 pro forma debt (see page 24), less $10.839
cash and $9.350 in cash collateral.
Page 20
<PAGE>
PUBLIC COMPANY ANALYSIS
<TABLE>
<CAPTION>
LTM 1998E LONG TERM LTM FIRM VALUE/ FIRM VALUE/ EQUITY EQUITY
LEVERAGED LEVERAGED DEBT/ EBITDA/ LTM 1998E MARKET CAP/ MARKET CAP/
UNIT COVERAGE (A) UNIT COVERAGE (A) FIRM VALUE INT. EXP. EBITDA EBITDA LTM DCF 1998E DCF
----------------- ----------------- ---------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GAS 0.9x(b) 1.2x(c) 41.4% 2.3x(d) 12.7x(d) 8.7x(e) 18.0x(f) 9.7x(g)
AmeriGas
Partners, L.P. 1.2x 1.3x 37.3% 2.2x 12.6x 12.1x 15.5x 14.1x
Cornerstone
Propane
Partners, L.P. 0.8x 1.0x 35.1% 2.1x 16.7x 13.7x 25.5x 16.9x
Ferrellgas
Partners, L.P 1.2x 1.1x 41.5% 2.1x 12.5x 12.0x 15.8x 15.9x
Heritage Propane
Partners, L.P. 1.1x 1.3x 46.0% 2.6x 10.9x 10.6x 15.7x 11.6x
National Propane
Partners, L.P. 0.9x 1.1x 36.8% 3.2x 16.3x 11.0x 18.0x 13.0x
Suburban Propane
Partners, L.P. 1.2x 0.9x 45.5% 2.9x 9.8x 10.3x 9.4x 13.6x
--- --- ---- --- ---- ---- ---- ----
MEAN 1.1x 1.1x 40.4% 2.5x 13.1x 11.6x 16.6x 14.2x
MEDIAN 1.1x 1.1x 39.4% 2.4x 12.5x 11.5x 15.7x 13.9x
=== === ==== === ==== ==== ==== ====
PRO FORMA 1.0x(b) 1.2x(c) 54.6% 2.1x(d) 10.2x(d) 8.0x(e) 12.4x 7.9x(g)
</TABLE>
- ------
EBITDA is defined as net income (loss) before extraordinary items plus
interest, income taxes, depreciation and amortization, impairment expense,
and other non-recurring and non-operating items.
(a) Defined as (DCF + interest)/(((GP units + common units)*MQD) + interest).
(b) For Gas and Pro forma only, LTM leveraged unit coverage figures use
adjusted 1998 budget estimates.
(c) For Gas and Pro forma only, 1998E leveraged unit coverage figures use 1999
estimates.
(d) For Gas and Pro forma only, LTM EBITDA figures are adjusted 1998 budget
estimates.
(e) For Gas and Pro forma only, 1998E EBITDA figures are 1999 estimates.
(f) For Gas and Pro forma only, LTM DCF figures are adjusted 1998 budget DCF
estimates.
(g) For Gas and Pro forma only, 1998E DCF figures are 1999 DCF estimates.
Page 21
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
GAS--STAND ALONE
($ IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME STATEMENT SUMMARY
(a): 1998 1999 2000 2001 2002 TERMINAL
- ------------------------ ------ ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
EBITDA 18,279 26,730 28,541 30,361 32,188
% increase 46.2% 6.8% 6.4% 6.0%
Net income (1,182) 3,733 3,621 3,695 3,953
CASH FLOW SUMMARY:
- ------------------
After-tax EBI 12,847 13,649 14,443 15,229
Depreciation and
amortization 13,858 14,868 15,893 16,934
Maintenance capital
expenditures (3,274) (3,395) (3,694) (3,816)
Working capital
increases (500) (500) (500) (500)
------- ------- ------- -------
Net operating cash flow
(free cash flow) 22,931 24,622 26,142 27,847
---------
WEIGHTED AVERAGE COST OF
CAPITAL (b) 7.9%
---------
TERMINAL EBITDA MULTIPLE (c) 10.2x
---------
Discount factor (d) 0.9629 0.8927 0.8276 0.7673 0.7388
Terminal value (e) $328,318
---------
Present value $329,621 $22,079 $21,980 $21,635 $21,367 $242,560
--------- ------- ------- ------- ------- --------
Current net debt (f) $(113,629)
---------
Net present value of
equity $ 215,992
=========
Common units/Total units
(g) 60.3%
---------
Equity value to common
units (h) $ 130,234
=========
</TABLE>
- -------
(a) Based on management projections.
(b) Based on comparable companies' WACC.
(c) Gas' current firm value of $232.0 million/$22.781 million normalized 1998
EBITDA = 10.2x, which represents a multiple of current year normalized
EBITDA.
(d) Discount factor calculated using half-year convention.
(e) Terminal value calculated using EBITDA multiple.
(f) Represents total projected debt less cash as of 9/30/98.
(g) Total units include common, subordinated and GP units.
(h) Current market value of common units is 3,832 units *$21.938 unit price =
$84,065
PAGE 22
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
GAS--PRO FORMA PAINEWEBBER MODEL (a)
($ IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 TERMINAL
------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
SUMMARY (b):
EBITDA 57,219 73,088 77,832 82,549 87,242
% increase 27.7% 6.5% 6.1% 5.7%
Net income (12,056) (5,514) (8,750) (12,482) (16,325)
CASH FLOW SUMMARY:
After-tax EBI 23,954 22,825 21,649 20,427
Depreciation and
amortization 48,609 54,482 60,375 66,290
Maintenance capital
expenditures (6,915) (7,109) (7,482) (7,680)
Working capital
increases (c) 8,839 (1,000) 1,000) (1,000)
------- ------- ------- -------
Net operating cash flow
(free cash flow) 74,487 69,198 73,542 78,037
---------
WEIGHTED AVERAGE COST OF
CAPITAL (d) 7.8%
---------
TERMINAL EBITDA MULTIPLE
(e) 10.2x
---------
Discount factor (f) 0.9632 0.8937 0.8292 0.7693 0.7410
Terminal value (g) $889,868
---------
PRESENT VALUE $ 913,993 $71,748 $61,841 $60,978 $60,033 $659,393
--------- ------- ------- ------- ------- --------
Less net debt (h) $(298,800)
---------
NET PRESENT VALUE OF
EQUITY $ 615,193
=========
Original common
units/Total units (i) 29.5%
---------
EQUITY VALUE TO COMMON
UNITS (j) $ 181,439
=========
</TABLE>
- -------
(a) Scenario assumes 4.1% steady attrition, 0% margin improvement, and $30
million in acquisitions at 4.75 multiple.
(b) Based on management projections.
(c) A.G. Edwards' assumption.
(d) Based on comparable companies' WACC.
(e) Gas' current firm value of $232.0 million/$22.781 million normalized 1998
EBITDA = 10.2x, which represents a multiple of current year normalized
EBITDA.
(f) Discount factor calculated using half-year convention.
(g) Terminal value calculated using EBITDA multiple.
(h) Represents total pro forma projected debt less cash and cash collateral as
of 9/30/98.
(i) Total units include common, newly issued common, senior subordinated,
subordinated and GP units.
(j) Current market value of common units is 3,832 units * $21.938 unit price =
$84,065.
Page 23
<PAGE>
CAPITAL STRUCTURE ANALYSIS
GAS -- PRO FORMA AS OF 9/30/98
($ IN THOUSANDS)
<TABLE>
<CAPTION>
=====================================================================================================
PRO FORMA
GAS OIL ADJUSTMENTS GAS
-------- -------- ------------- -----------
<S> <C> <C> <C> <C>
DEBT:
8.04% First Mortgage Notes $ 85,000 $ 0 $ 0 $ 85,000
7.25% WC Revolver 7,457 - - 7,457
7.25% Acquisition Facility 10,673 - - 10,673
7.17% First Mortgage Notes 11,000 - - 11,000
11.96% Senior Notes - 60,000 (60,000) -
14.10% Senior Notes - 3,100 (3,100) -
14.10% Subordinated Notes - 3,100 (3,100) -
10.13% Sub Notes & Sr Notes - 50,000 (50,000) -
9.38% Sub Notes & Sr Notes - 75,000 (75,000) -
12.25% Sub Notes & Sr Notes - 81,250 (81,250) -
8.00% Existing Acq Notes Payable - 13,859 - 13,859
8.46% Exchange Debt - - 66,000 66,000
8.50% New Debt - - 125,000 125,000
-------- -------- -------- --------
TOTAL DEBT $114,130 $286,309 ($81,450) $318,989
WEIGHTED AVERAGE COST OF DEBT 8.2%
PREFERRED STOCK:
14.33% Preferred Stock $ 0 $ 4,167 ($4,167) $ 0
12.88% Preferred Stock - 30,000 (30,000) -
-------- -------- -------- --------
- 34,167 (34,167) -
COMMON EQUITY $ 67,042 ($210,015) $112,537 ($30,436)
- -----------------------------------------------------------------------------------------------------
</TABLE>
Page 24
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
PRO FORMA WEIGHTED AVERAGE COST OF CAPITAL DERIVATION
($ IN MILLIONS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL
MARKET IMPLIED TOTAL TOTAL
LEVERED VAL. UNIT TOTAL MARKET DEBT/ DEBT AS % UN-
BETA DEBT PRICE AT UNITS VALUE OF TOTAL OF TOTAL LEVERED
COMPARABLE COMPANY (A) (BK=MKT) (4/22/98) OUT. (MIL) EQUITY EQUITY CAPITAL BETA
- ------------------ ------- -------- --------- ---------- -------- ------ --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriGas Partners, L.P. 0.52 $777.8 $25.938 41.9 $1,108.6 70.2% 41.2% 0.306
Cornerstone Propane
Partners, L.P. 0.41 235.8 22.688 19.7 455.7 51.7% 34.1% 0.270
Ferrellgas Partners,
L.P. 0.39 537.2 20.875 31.3 666.6 80.6% 44.6% 0.216
Heritage Propane
Partners, L.P. 0.44 176.9 23.125 8.4 197.8 89.4% 47.2% 0.232
National Propane
Partners, L.P. 0.34 147.4 20.313 11.2 232.9 63.3% 38.8% 0.208
Star Gas Partners, L.P. 0.34 96.0 21.938 6.2 139.4 68.9% 40.8% 0.201
Suburban Propane
Partners, L.P. 0.38 428.2 18.813 28.7 551.4 77.6% 43.7% 0.214
Comparable group's average unlevered
----------------------------------------------------
beta: 0.23 Pro forma capitalization-at market (b)
Pro forma debt-to-equity ratio (b): 111.9% Total debt $319.0 52.8%
Pro forma debt as a percent of total Total equity 285.0 47.2%
capital (b): 52.8% ------ ------
Comparable group's beta relevered for
Pro forma capital structure: 0.392 $604.0 100.0%
------- ----------------------------------------------------
DERIVATION OF WEIGHTED AVERAGE COST OF CAPITAL: MARKET RISK PREMIUM RANGE (D)
---------------------------------------
11.3% 12.3% 13.3%
---------------------------------------
Pro forma theoretical levered beta: 0.392
Assumed % of equity in Pro forma capital structure
(b): 47.2%
Risk-free rate of return (c): 5.7%
Pro forma cost of equity range (at various market
risk premiums): 10.1% 10.5% 10.9%
==== ==== ====
Pro forma assumed tax rate: 35.0%
Assumed % of debt in capital structure (b): 52.8%
Pro forma estimated cost of debt (e): 8.2%
Pro forma estimated after-tax cost of debt: 5.3% 5.3% 5.3% 5.3%
--- --- ---
Pro forma weighted average cost of capital range
---------------------------------------
(f): 7.6% 7.8% 8.0%
---------------------------------------
</TABLE>
- --------
(a) Source; Bloomberg. 143 week (maximum weekly time period allowed, or the
number of weeks available, which may be less than 143) adjusted beta
relative to the S&P 500 index.
(b) Market value of long-term debt is assumed to be equal to the book value.
(c) Ten-year Treasury rate on April 22, 1998.
(d) Ibbotson Associates 1997. Total returns for small company stocks of 17.7%
minus the risk-free rate.
(e) Based on Pro forma current debt structure.
(f) Calculation based upon use of the Capital Asset Pricing Model (CAPM).
25
<PAGE>
Round II
Appendices To
Preliminary Report to
The Special Committee of Gas
Analyses Performed at $2.50 Per Share
A.G.Edwards & Sons, Inc.
INVESTMENT BANKING
May 4, 1998
<PAGE>
Equity Purchase Price Calculation
Implied Equity Value of Oil's Assets
(units in thousands, $ in millions,
except per unit amounts)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Purchase Price of Oil's Equity Purchase Price of Oil's Equity
------------------------------ -----------------------------------------------------
Value of Securities Equity Value of Oil's Value of Oil's GP and
Event Paid to Oil Shareholders Heating Oil Assets Subordinated Units in Star
- ------------------------------------ ------------------------- ---------------------- ---------------------------
<S> <C> <C> <C>
Issuance of Senior Subordinated
Units to Public Oil Shareholders 2,160 x $ 19.86
------------------
$42.9 $42.9 --
Distribution of General Partner
Units to Inside Oil Shareholders 127 x $ 21.46
-------------------
$2.7 -- $2.7
Distribution of Subordinated
Units to Inside Oil Shareholders 540 x $ 16.44
-------------------
$8.9 -- $8.9
Issuance of General Partner
Units to Inside Oil Shareholders 147 x $ 21.46
-------------------
$3.2 $3.2 --
Issuance of Senior Subordinated
Units to Inside Oil Shareholders 441 x $ 19.86
-------------------
$8.8 $8.8 --
Retire Subordinated Units 1,856 x $16.44
--------------------
($30.5) $30.5
$24.3 $42.1
----- -------------------------------------
Total $66.4 $66.4
</TABLE>
Divided by 26,563 shares of Oil's Common stock = $ 2.50 per share
Page 1
<PAGE>
PREMIUM PAID ANALYSIS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Dollars
STOCK PRICE PREMIUM ANALYSIS(a) in thousands Notes
- ----------------------------------------- ---------------- --------------------------------------------------------
<S> <C> <C>
Equity purchase price of Oil $ 66,408 $2.50 share price x 26,563 shares.
Premium to stock price one day prior 53.8% $1.625 close on April 22, 1998.
Premium to stock price one month prior 60.0%
Premium to stock price three months prior 0.0%
Premium to stock price six months prior -20.0%
PURCHASE PRICE
- -----------------------------------------
Equity purchase price of heating oil $ 24,294
assets
Debt assumption value (b) 338,223
----------
Aggregate purchase price of heating oil $ 362,517
assets ==========
MULTIPLES
- ---------------------------------------- -----------
MULTIPLES NOTES
----------- ---------------------------------------------
1997 Revenue $ 548,141 0.7 x As a multiple of aggregate transaction value.
1997 EBITDA (c) 36,010 10.1 As a multiple of aggregate transaction value.
1997 EBIT (d) 6,264 57.9 As a multiple of aggregate transaction value.
1997 Net loss to common shares (d) ($ 19,338) NM As a multiple of equity value.
Equity (e) (177,033) NM As a multiple of equity value.
1997 Adjusted EBITDA (c) 43,040 8.4 x As a multiple of aggregate transaction value.
1998 EBITDA budget (c) 43,440 8.3 As a multiple of aggregate transaction value.
Adj. 1998 EBITDA budget (c) 38,440 9.4 As a multiple of aggregate transaction value.
1999P EBITDA (c) 45,858 7.9 As a multiple of aggregate transaction value.
-----------
</TABLE>
_______________________________________________________
(a) Updated through April 22, 1998.
(b) Includes cost of debt at assumed redemption value, preferred stock at
assumed redemption value, transaction fees, and certain
off-balance sheet liabilities, net of excess cash.
(c) Calculated as gross profit minus SG&A expense and direct delivery
expense.
(d) Excludes restructuring charge, pension curtailment expense,
provision for supplemental benefits and corporate identity expense.
(e) As of 12/31/97.
Page 2
<PAGE>
Transaction Multiple Analysis
Firm Valuation
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Purchase Price of Heating Oil Assets $ 24,294,340
----------------
+ Cost of Debt at Redemption Value 290,992,000
+ Cost of Preferred stock at Redemption Value 34,375,000
+ Transaction Fees 19,104,000
-- 338,223,100
+ Off-Balance Sheet Pension and Tax Liability 8,500,000
- Excess Cash
Oil's cash balance at 9/30/98 (a) 22,355,000
Required cash on hand (500,000)
Additional Surplus (b) (7,107,100) 14,747,900
----------------
----------------
Firm Value $362,517,440
================
</TABLE>
_______________________________________________________________________________
(a) Includes cash collateral of $9,350,000.
(b) Assumes an Additional Surplus of $1.10 per new common unit issued is
funded by Oil.
Page 3
<PAGE>
Transaction Multiple Analysis
Transaction Multiples for Firm Valuation
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
EBITDA
---------------------------------
Purchase Price Year Amount Multiple Paid
--------------- ------------------ ----------- -----------------
<S> <C> <C> <C>
$362,517,440 1997 Adjusted $43,040,000 8.4x
$362,517,440 Adjusted 1998 Budget $38,440,000 9.4x
$362,517,440 1999 Projected $45,858,000 7.9x
</TABLE>
Page 4
<PAGE>
<TABLE>
<CAPTION>
Transaction Multiple Analysis
Distribution of Value
- ------------------------------------------------------------------------------------------------------------------------------------
OIL
1997 Adjusted EBITDA
EBITDA Multiple Purchase Price
- -------------- ---------------- ----------------------
<S> <C> <C>
$43,040,000 8.4x $362,517,440
Ability to Further Consolidate Heating Oil Industry Core Business
- --------------------------------------------------- --------------------
<S> <C> <C> <C> <C>
Acquisition EBITDA $ 43,040,000
EBITDA Multiple Purchase Price EBITDA Decline Rate 7.75% (a)
- -------------- ---------------- ---------------------- WACC 7.80%
$6,315,789 4.75x $ 30,000,000
Decline Rate 7.75% (a)
WACC 7.80%
Perpetuity $ 40,617,940
Purchase Price $ 30,000,000
----------------------
Net Present Value of the Heating Oil Acq. $ 10,617,940
Value in perpetuity of Ability to
---------------------- --------------
Consolidate Heating Oil Industry $136,140,329 Value of Core Business $276,797,720
====================== ==============
------------------------------------------------------------------
- --------------------------------------------------------------------------------
Implied Total Valuation $412,938,049
% of Valuation attributable to core business 67.0%
% of Valuation attributable to consolidation opportunities 33.0%
- --------------------------------------------------------------------------------
</TABLE>
(a) A.G. Edwards'estimate of the decline rate of EBITDA based on a 4.1%
attrition rate.
Page 5
<PAGE>
<TABLE>
<CAPTION>
Transaction Multiple Analysis
Transaction Multiples for Existing Heating Oil Business
- ------------------------------------------------------------------------------------------------------------------------------------
Revised EBITDA
-------------------------------------
Purchase Price (a) Year Amount Multiple Paid
- ----------------------- ---------------- ----------------- ---------------------
<S> <C> <C> <C>
$243,000.133 1997 Adjusted $43,040,000 5.6x
$243,000,133 Adjusted 1998 Budget $38,440,000 6.3x
$243,000,133 1999 Projected $45,858,000 5.3x
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Represents A.G. Edwards' estimate of the portion of the $362.5 million price
being paid for Oil's heating oil business that can be attributable to its
core business. Calculation: $362.5 million x 66.9%.
Page 6
<PAGE>
Accretion/Dilution Analysis
Variations in Margin Growth Rates and Acquisition Assumptions
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
$2.00 per share $2.50 per share
4.1% Attrition 4.1% Attrition
Gas $0.00 Margin growth $0.00 Margin growth
Stand-alone $30.0mm at 4.75x Acquisitions $30.0mm at 4.75x Acquisitions
--------------- -------------------------------- -------------------------------
DCF PER UNIT
<S> <C> <C> <C>
1998E (a) $1.220 $1.770 $1.680
1998N (b) 1.930 2.500 2.370
l999P 2.090 2.780 2.630
ACCRETION / DILUTION
1998E (a) 45.1% 37.7%
1998N (b) 29.5% 22.8
1999P 33.0% 25.8%
COMMON UNIT COVERAGE
1998E (a) 0.90x l.00x 1.00x
1998N (b) 1.42 1.41 1.41
1999P 1.48 1.50 1.50
TOTAL UNIT COVERAGE
1998E (a) 0.55x 0.81x 0.76x
1998N (b) 0.88 1.14 1.08
1999P 0.95 1.21 1.15
LEVERAGED UNIT COVERAGE (c)
1998E (a) 0.94x l.00x l.00x
1998N (b) 1.21 1.18 1.18
1999P 1.24 1.22 1.22
------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) 1998 estimate assumes no acquisitions for either company, and is
adjusted to reflect actual results through 3/31/98.
(b) 1998 budgeted.
(c) Defined as (DCF + Int)/[((GP units + common units)* MQD) + Int)]
Page 7
<PAGE>
Public Company Analysis
[_] A.G. Edwards compared certain financial and market information of
Gas on a historical and pro forma basis to that of certain public
master limited partnerships which A.G. Edwards deemed relevant
for the purposes of this analysis. A.G. Edwards reviewed the
trading multiples from a total of 6 public propane master limited
partnerships.
[_] The selected propane master limited partnerships are as
follows:
- AmeriGas Partners, L.P. - Heritage Propane
Partners, L.P.
- Cornerstone Propane Partners, L.P. - National Propane
Partners, L.P.
- Ferrellgas Partners, L.P. - Suburban Propane
Partners, L.P.
[_] No company used in the analysis is identical to Gas.
<TABLE>
<CAPTION>
Public Comparable Companies (a)
-------------------------------------------------------------------------------------------------------------------
Public Public
Pro Forma Company Company
Gas Gas Medians Ranges
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Yield 10.0% 10.5% 9.6% 8.5% to 10.6%
Firm value/LTM EBITDA 12.7x (b) 10.5x (b) 12.5x 9.8x to 16.7x
Firm value/1998 normalized EBITDA 8.7x (c) 8.2x (c) 11.5x 10.3x to 13.7x
Equity Market Cap/LTM DCF 18.0x (d) 13.1x (d) 15.7x 9.4x to 25.5x
Equity Market Cap/1998 normalized DCF 9.7x (e) 8.3x (e) 13.9x 11.6x to 16.9x
LTM commnon unit coverage 0.9x (f) 1.0x (f) 1.4x 0.6x to 1.5x
1998E common unit coverage 1.5x (g) 1.5x (g) 1.4x 0.9x to 1.9x
LTM total unit coverage 0.6x (f) 0.8x (f) 0.7x 0.4x to l.0x
1998E total unit coverage 1.0x (g) 1.1x (g) 0.7x 0.7x to l.0x
1998E leveraged unit coverage 1.2x (g)(h) 1.2x (g)(h) 1.1x 0.9x to 1.3x
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Public comparable companies include: APU, CNO, FGP, HPG, CNL and
SPH.
(b) Firm value/adjusted 1998 budget EBITDA.
(c) Firm value/1999 estimated EBITDA.
(d) Equity market cap/adjusted 1998 budget EBITDA.
(e) Equity market cap/l999 estimated DCF.
(f) Adjusted 1998 budget.
(g) 1999 estimates.
(h) Defined as (DCF + interest)/(((GP units + common units)*MQD)+
interest).
Page 8
<PAGE>
Public Company Analysis
($ in millions, except per unit data)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Closing Implied Implied Common
Price on Market Value Firm Distribution Units/
Company Ticker (4/22/98) of Equity Value per Unit Yield Total Units
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gas (a) $21.938 $139.4 $232.0 $2.20 10.0% 60.3%
AmeriGas Partners L.P. APU 25.938 1,108.6 1,867.2 2.20 8.5% 52.8%
Cornerstone Propane Partners, L.P. (d) CN0 22.688 455.7 671.7 2.16 9.5% 66.5%
Ferrellgas Partners L.P. (e) FGP 20.875 666.6 1,192.3 2.00 9.6% 47.0%
Heritage Propane Partners L.P. HPG 23.125 197.8 371.8 2.00 8.6% 55.8%
National Propane Partners L.P. NPL 20.313 232.9 375.6 2.10 10.3% 59.6%
Suburban Propane Partners L.P. (f) SPH 18.813 551.4 942.0 2.00 10.6% 75.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Mean 9.5% 59.5%
Median 9.6% 57.7%
- -----------------------------------------------------------------------------------------------------------------------------------
Pro Forma $ 21.938 $ 300.7 (g) $ 599.5 (h) $ 2.30 10.5% 75.1%
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
LTM Distributable Cash Flow/ FY98E Distributable Cash Flow/
---------------------------- -------------------------------
Distribution to Distribution FY98E Distribution to Distribution
Company Common Units to Total Units DCF/unit Common Units to Total Units
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gas 0.9x (b) 0.6x (b) $ 2.09 (c) 1.5x (c) 1.0x (c)
AmeriGas Partners L.P. 1.5x 0.8x 2.14 1.9x l.0x
Cornerstone Propane Partners, L.P. 0.6x 0.4x 1.47 1.1x 0.7x
Ferrellgas Partners L.P. 1.4x 0.7x 1.34 1.4x 0.7x
Heritage Propane Partners L.P. 1.3x 0.8x 2.01 1.8x 1.0x
National Propane Partners L.P. 0.9x 0.5x 1.60 1.3x 0.8x
Suburban Propane Partners L.P. 1.4x 1.0x 1.41 0.9x 0.7x
- ------------------------------------------------------------------------------------------------------------------------------------
Mean 1.2x 0.7x 1.4x 0.8x
Median 1.4x 0.7x 1.4x 0.7x
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma 1.0x (b) 0.8x (b) 2.64 (c) 1.5x 1.1x (c)
</TABLE>
- ----------------------------------
1998 estimates per A.G. Edwards' research, except for Gas, Oil, and Pro Forma.
Implied Firm Value equals common, subordinated and GP units, multiplied by the
market price of common units plus debt, less cash.
(a) Pro Forma for the Pearl Gas acquisition and the common unit offering.
Fiscal 1997 maintenance capital expenditure used as LTM figure.
(b) For Gas and Pro Forma only, LTM DCF figures are adjusted 1998 budget DCF
estimates.
(c) For Gas and Pro Forma only, FY98E DCF figures are 1999 DCF estimates.
(d) Financial information pro forma for common unit offering. Maintenance
capital expenditures assumed to be 8% of EBITDA due to lack of disclosure.
(e)Maintenance capital expenditures assumed to be 8% of EBITDA due to lack of
disclosure.
(f) Financial figures exclude $5.1 million gain from sale of minority interest.
(g) 13,708 units x $21.375.
(h) $300.7 in equity plus $318.989 pro forma debt, less $10.839 cash and $9.350
in cash collateral.
Page 9
<PAGE>
PUBLIC COMPANY ANALYSIS
<TABLE>
<CAPTION>
LTM 1998E LONG TERM LTM FIRM VALUE/
LEVERAGED LEVERAGED DEBT/ EBITDA/ LTM
UNIT COVERAGE (A) UNIT COVERAGE (A) FIRM VALUE INT. EXP. EBITDA
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GAS 0.9x (b) 1.2x (c) 41.4% 2.3x (d) 12.7x (d)
AmeriGas Partners, L.P. 1.2x 1.3x 37.3% 2.2x 12.6x
Cornerstone Propane Partners, L.P. 0.8x 1.0x 35.1% 2.1x 16.7x
Ferrellgas Partners, L.P. 1.2x 1.1x 41.5% 2.1x 12.5x
Heritage Propane Partners, L.P. 1.lx 1.3x 46.0% 2.6x 10.9x
National Propane Partners, L.P. 0.9x 1.1x 36.8% 3.2x 16.3x
Suburban Propane Partners, L.P. 1.2x 0.9x 45.5% 2.9x 9.8x
- ---------------------------------------------------------------------------------------------------------------------------------
MEAN 1.1x 1.1x 40.4% 2.5x 13.1x
MEDIAN 1.1x 1.1x 39.4% 2.4x 12.5x
- ---------------------------------------------------------------------------------------------------------------------------------
PRO FORMA 1.0x (b) 1.2x (c) 53.2% 2.1x (d) l0.5x (d)
<CAPTION>
FIRM VALUE/ EQUITY EQUITY
1998E MARKET CAP/ MARKET CAP/
EBITDA LTM DCF 1998E DCF
-----------------------------------------------
<S> <C> <C> <C>
GAS 8.7x (e) 18.0x (f) 9.7x (g)
AmeriGas Partners, L.P. 12.1x 15.5x 14.1x
Cornerstone Propane Partners, L.P. 13.7x 25.5x 16.9x
Ferrellgas Partners, L.P. 12.0x 15.8x 15.9x
Heritage Propane Partners, L.P. 10.6x 15.7x 11.6x
National Propane Partners, L.P. 11.Ox 18.0x 13.0x
Suburban Propane Partners, L.P. 10.3x 9.4x 13.6x
- ----------------------------------------------------------------------------------------
MEAN 11.6x 16.6x 14.2x
MEDIAN 11.5x 15.7x 13.9x
- ----------------------------------------------------------------------------------------
PRO FORMA 8.2x (e) 13.1x (f) 8.3x (g)
</TABLE>
- -------------------------------------------------------------
EBITDA is defined as net income (loss) before extraordinary items plus
interest, income taxes, depreciation and amortization, impairment expense,
and other non-recurring and non-operating items.
(a) Defined as (DCF + interest)/(((GP units + common units)*MQD)+interest).
(b) For Gas and Pro forma only, LTM leveraged unit coverage figures
use adjusted 1998 budget estimates.
(C) For Gas and Pro Forma only, 1998E leveraged unit coverage figures
use 1999 estimates.
(d) For Gas and Pro Forma only, LTM EBITDA figures are adjusted 1998
budget estimates.
(e) For Gas and Pro Forma only, 1998E EBITDA figures are 1999 estimates.
(f) For Gas and Pro Forma only, LTM DCF figures are adjusted 1998 budget
DCF estimates.
(g) For Gas and Pro Forma only, 1998E DCF figures are 1999 DCF
estimates.
Page 10
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
PRO FORMA WEIGHTED AVERAGE COST OF CAPITAL DERIVATION
($ IN MILLIONS)
<TABLE>
- ---------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL TOTAL
MARKET TOTAL IMPLIED TOTAL DEBT AS
LEVERED VAL. UNIT UNITS MARKET DEBT/ % OF
BETA DEBT PRICE AT OUT. VALUE OF TOTAL TOTAL UNLEVERED
COMPARABLE COMPANY (A) (BK=MKT) (4/22/98) (MIL) EQUITY EQUITY CAPITAL BETA
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriGas Partners, L.P. 0.52 $777.8 $25.938 41.9 $1,108.6 70.2% 41.2% 0.306
Cornerstone Propane
Partners, L.P. 0.41 235.8 22.688 19.7 455.7 51.7% 34.1% 0.270
Ferrellgas Partners,
L.P. 0.39 537.2 20.875 31.3 666.6 80.6% 44.6% 0.216
Heritage Propane
Partners, L.P. 0.44 176.9 23.125 8.4 197.8 89.4% 47.2% 0.232
National Propane
Partners, L.P. 0.34 147.4 20.313 11.2 232.9 63.3% 38.8% 0.208
Star Gas Partners, L.P. 0.34 96.0 21.938 6.2 139.4 68.9% 40.8% 0.201
Suburban Propane
Partners, L.P. 0.38 428.2 18.813 28.7 551.4 77.6% 43.7% 0.214
---------------------------
Comparable group's average unlevered Pro forma capitalization--
beta: 0.23 at market (b)
Pro forma debt-to-equity ratio (b): 106.1% Total debt $319.0 51.5%
Pro forma debt as a percent of total
capital (b): 51.5% Total equity 300.7 48.5%
----- ----
Comparable group's beta relevered for ----------------------------
pro forma capital structure: 0.384 $619.7 100.0%
=======
DERIVATION OF WEIGHTED AVERAGE COST OF CAPITAL: MARKET RISK PREMIUM RANGE (D)
- ----------------------------------------------- -----------------------------
11.3% 12.3% 13.3%
-------------------
Pro forma theoretical levered beta: 0.384
Assumed % of equity in Pro forma capital structure
(b): 48.5%
Risk-free rate of return (c): 5.7%
Pro forma cost of equity range (at various market
risk premiums): 10.0% 10.4% 10.8%
==== ==== ====
Pro forma assumed tax rate: 35.0%
Assumed % of debt in capital structure (b): 51.5%
Pro forma estimated cost of debt (e): 8.2%
Pro forma estimated after-tax cost of debt: 5.3% 5.3% 5.3% 5.3%
------ ---- ----
Pro forma weighted average cost of capital range 7.6% 7.8% 8.0%
(f): ------ ---- ----
--------------------
</TABLE>
- ------
(a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the
number of weeks available, which may be less than 143) adjusted beta
relative to the S&P 500 index.
(b) Market value of long-term debt is assumed to be equal to the book value.
(c) Ten-year Treasury rate on April 22, 1998.
(d) Ibbotson Associates 1997. Total returns for small company stocks of 17.7%
minus the risk-free rate.
(e) Based on Pro forma current debt structure.
(f) Calculation based upon use of the Capital Asset Pricing Model (CAPM).
PAGE 11
<PAGE>
Draft 5/7/98
PRELIMINARY STATUS REPORT
BOARD OF DIRECTORS
STAR GAS PARTNERS, L.P.
Petro management and its advisors have been working on a proposed
transaction between Petro and Star for over a year. Star Committee has engaged
Baker & Botts, LLP as its counsel and A.G. Edwards & Sons, Inc. as its financial
advisor. After one month of preliminary due diligence and review, the Committee
and its advisors better understand and appreciate the complexity of the proposed
transaction and the amount of hard work and creativity dedicated to this
proposal.
During the past year, both parties have experienced management changes and
adverse weather conditions. During this period, Petro has suspended its common
dividends and its publicly held common shares have traded down. Star's publicly
held common units have traded flat to slightly up, but Star has made
distributions to its common unitholders and its subordinated unitholders (that
is, Petro) even though such distributions exceeded distributable cash flow (that
is, Star returned capital). The Star Committee notes that Petro's capital
constraints have effectively eliminated its historic acquisition program while
Star has demonstrated a far more viable acquisition program.
In light of these and other significant changes in relative performance,
market conditions and strategic rationale for the proposed transaction, the Star
Committee (after considering the preliminary report of A.G. Edwards and
consulting with counsel), proposes a re-examination, restructuring and repricing
of the proposed transaction between Petro and Star.
Subject to further diligence and assuming no material adverse changes in
the parties or in market conditions, the Star Committee proposes:
(A) Star Partnership Agreement. Appropriate steps should be initiated to
--------------------------
amend the Star Partnership Agreement as of the closing date (assumed
to be September 30, 1998) in order to:
(A-1) raise the future required minimum quarterly distribution
("MQD") for common unitholders from $2.20 per annum to $2.30
per annum;
(A-2) authorize a new class of senior subordinated units which shall
be junior to all present and future common units, but senior to
the present subordinated units; and
(A-3) prohibit the payment of any future distributions to senior
subordinated unitholders and to subordinated unitholders except
from net distributable cash
<PAGE>
flow available for such period after first paying MQD to the
common unitholders for such period plus any cumulative common
unit arrearages.
(B) Definitive Transaction Agreement. A draft of the definitive
--------------------------------
transaction agreement should be prepared by Petro for Star Committee's
careful consideration (and for future submission to the Board of
Directors and common unitholders of Star and to the Board of Directors
and shareholders of Petro for approval) setting forth the following
steps:
(B-1) At closing of the Transaction, Star shall be obligated to pay
to Petro or assume from Petro a "Maximum Aggregate
Consideration" of [$390 million] consisting of:
(A) The issuance of 6,400 new common units at a price per
common unit of [$______]. The gross spread on this
offering shall not exceed 5.0%.
(B) The issuance of $125,000 of new debt. The gross spread on
this offering shall not exceed 3.0%.
(C) The principal amount of all of Petro's outstanding debt
and preferred stock of at closing, less the value of
Petro's cash balance at closing.
(D) The issuance of no greater than 2,100 new senior
subordinated units. The value of such units is assumed to
equal $20.00 per unit.
(E) The outstanding balance of subordinated units at closing.
The value of such units is assumed to equal $16.58 per
unit.
(F) The outstanding balance of GP units, which shall be no
greater than 2% of all outstanding units. The value of
such units is assumed to equal [$21.62] per unit.
(B-2) Consideration paid to Petro's common shareholders shall consist
only of the senior subordinated, subordinated and GP units
included in (B-1)(D), (B-1)(E) and (B-1)(F).
(B-3) Prior to the closing of the Transaction, in return for the
Maximum Aggregate Consideration defined in (B-1), Petro shall
represent, warrant and agree that:
(A) Petro shall set up appropriate reserves and fund the
following:
(1) surplus cash available for distributions equal to
[$1.10] per new common unit issued,
(2) excluding only the gross spreads on the new MLP
equity and debt offerings, all other Transaction
costs, including financial advisory fees and fairness
opinions for Petro and Star; legal, accounting and
printing fees for Petro and Star; all exchange and
solicitation fees related to the retirement or
redemption of Petro's debt and preferred stock; all
appraisals and environmental reports; all rating
agencies and bank fees; and all other out-of-pocket
costs and expenses associated with the Transaction,
and
<PAGE>
(3) any "Unearned MQD" monies that Petro wishes to have
available for payment to senior subordinated or
subordinated unitholders following the closing of the
Transaction.
(B) Petro shall have no borrowed money debt of any kind
outstanding other than any such amounts included in (B-1);
(C) Petro shall have no preferred stock of any kind
outstanding other than any such amounts included in (B-1);
(D) Petro shall have a minimum balance of cash of [$500,000],
a positive working capital balance (subject to further due
diligence), and a total common shareholders' deficit on
its balance sheet of no greater than [$______ million],
all as of the closing.
(B-4) In the event Petro is unable or unwilling to represent and
warrant each of the matters set forth in (B-3), then the
Maximum Aggregate Consideration set forth in (B-1) shall be
reduced on a dollar-for-dollar basis.
<PAGE>
Draft 5/20/98
PROPOSAL TO
THE SPECIAL COMMITTEE
STAR GAS PARTNERS, L.P.
Subject to further diligence and assuming no material adverse changes in
Star or Petro, or in market conditions, A.G. Edwards proposes:
(A) Increase Common Unit Distribution Payments. Simultaneous with the
------------------------------------------
closing date, the quarterly distribution for common unitholders shall
be raised from $2.20 per annum to $2.30 per annum.
(B) Star Partnership Agreement. Appropriate steps should be initiated to
--------------------------
amend the Star Partnership Agreement as of the closing date (assumed
to be September 30, 1998) in order to:
(B-1) authorize the creation of new classes of senior subordinated
units and deferred partnership units, which shall be junior to
all present and future common units, but senior to the present
subordinated units;
(B-2) prohibit the payment of any distributions to senior
subordinated unitholders and to subordinated unitholders except
from net distributable cash flow available for such period
after first paying MQD to the common unitholders for such
period plus any cumulative common unit arrearages; and
(B-3) provide a surplus available for common unit distributions
equal to $ 1.10 per new common unit, as part of the Refinancing
Transaction, described below.
(C) Definitive Transaction Agreement. A draft of the definitive
--------------------------------
transaction agreement should be prepared by Petro for The Special
Committee's careful consideration (and for future submission to the
Board of Directors and common unitholders of Star and to the Board of
Directors and shareholders of Petro for approval) setting forth the
following steps:
(C-1) At closing of the Transaction, Star shall be obligated to pay
to Petro's common shareholders, subject to the Revision Amount
as defined in (C-4) below, the following:
(A) 2,718 senior subordinated units of Star;
(B) 524 subordinated units of Star; the balance must be
delivered to Star free and clear for retirement;
<PAGE>
(C) 289 GP units of Star; and
(D) 909 deferred partnership units of Star, convertible into
senior subordinated units with a trigger relating to the
financial performance of Petro only.
(C-2) The Closing shall be contingent upon the successful completion
of the following (collectively, the "Refinancing Transaction"):
(A) The issuance of 6,588 new common units at a gross spread of
no greater than 5.0%, and
(B) The issuance of $125,000 new debt at a gross spread of no
greater than 3.0%
The use of proceeds of the Refinancing Transaction shall be
solely to refinance certain of the outstanding indebtedness
assumed from Petro.
(C-3) Prior to the closing of the Transaction, Petro shall represent,
warrant and agree that:
(A) Prior to the Refinancing Transaction, Petro shall have a
balance of debt and preferred stock (at redemption value),
less any cash balance in excess of such amounts required in
(C-3)(B) below, of no more than $331,367.
(B) Petro shall have a minimum cash balance of $500,000, a
positive working capital balance, and a total common
shareholders' deficit on its balance sheet of no greater
than [$___ million], all as of the closing.
(C) Petro shall set up appropriate reserves and fund all of the
following transactions costs: financial advisory fees and
fairness opinions for Petro and Star; legal, accounting and
printing fees for Petro and Star; all exchange and
solicitation fees related to the retirement or redemption
of Petro's debt and preferred stock; all appraisals and
environmental reports; all rating agencies and bank fees;
and all other out-of-pocket costs and expenses associated
with the Transaction.
(D) Petro shall not declare or distribute any cash dividends to
its common shareholders.
(C-4) In the event Petro is unable or unwilling to represent and
warrant each of the matters set forth in (C-3), then a Revision
Amount (defined below) will be established. The Revision Amount
shall reduce, on a dollar-for-dollar basis, the amount to be
paid to the Petro common shareholders as set forth in (C-1).
The Revision Amount shall be calculated as follows:
<PAGE>
(A) If the cumulative amount of all revisions, taken as a
whole, is less than zero, then the Revision Amount will be
equal to zero dollars, and any cash balance remaining at
Petro shall be transferred to Star.
(B) If the cumulative amount of all revisions, taken as a
whole, is greater than zero, then the Revision Amount will
be equal to the cumulative amount of all revisions, taken
as a whole.
<PAGE>
Round III
UPDATE TO
PRELIMINARY REPORT TO
THE SPECIAL COMMITTEE OF GAS
A.G.EDWARDS & SONS, INC.
INVESTMENT BANKING
May 21, 1998
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Section
-------
<S> <C>
Introduction .......................................................... I
Review of Events to Date .............................................. II
Summary of Transaction ................................................ III
Summary Observations .................................................. IV
Updated Report to the Special Committee ............................... V
Recommended Proposal to Board of Directors ............................ VI
</TABLE>
<PAGE>
INTRODUCTION
TRANSACTION PROPOSAL [ ] During 1997, Gas ("Gas" or the "Company") and Oil
("Oil") discussed the idea of a possible business
combination by and between Gas and Oil. The
series of proposed transactions involved in such
combination is referred to as the "Transaction".
A.G. EDWARDS' [ ] A.G. Edwards & Sons, Inc. ("A.G. Edwards") has
been engaged by the Special Committee (the
"Special Committee") of the Board of Directors of
Gas (the "Board") to act as its financial advisor
with respect to the Transaction and to issue to
the Board an opinion as to the fairness, from a
financial point of view, to the common
unitholders of Gas who are not affiliated with
Oil (the "Common Unitholders"), of the
Transaction (the "Fairness Opinion").
[ ] The preparation of a fairness opinion is not
susceptible to partial analyses or summary. In
rendering its Fairness Opinion, A.G. Edwards will
apply its judgment to a variety of complex
analyses and assumptions. A.G. Edwards may give
various analyses more or less weight than other
analyses, and may deem various assumptions more
or less probable than other assumptions. The
assumptions made and the judgments applied by
A.G. Edwards in rendering its opinion are not
readily susceptible to description beyond that
set forth in the written text of the Fairness
Opinion itself.
Page 1
<PAGE>
INTRODUCTION
(continued)
AS PART OF ITS ENGAGEMENT, [ ] A review of the preliminary structure of the
A.G. EDWARDS' ACTIVITIES Transaction;
INCLUDED, BUT WERE NOT [ ] A review of Gas' and Oil's historical
LIMITED TO, THE FOLLOWING: financial statements and the financial
projections of Gas and Oil;
[ ] A review of certain market data of Gas'
Common Units and Oil's Common Stock;
[ ] An analysis of the pro forma financial
statements of Gas giving effect to the
Transaction (as proposed);
[ ] Conversations with PaineWebber regarding the
nature and extent of development of the terms
of the Transaction;
[ ] An investigation regarding current operations
and future prospects of Gas and Oil, through
interviews with members of Gas' and Oil's
management, respectively;
[ ] A review of the industries in which Gas and
Oil operate;
[ ] A review of the market data for stocks of
public companies in the same or similar lines
of business to Gas;
[ ] Analyses of the Transaction using various
valuation methodologies; and
[ ] Other analyses which it deemed necessary.
Page 2
<PAGE>
INTRODUCTION
(continued)
NATURE OF INFORMATION [ ] A.G. Edwards relied upon and assumed, without
REVIEWED AND PRESENTED independent verification, the accuracy and
completeness of all financial and other
information publicly available, or furnished to,
or otherwise discussed with A.G. Edwards
including financial statements and financial
projections, as provided by management of Gas and
Oil and Oil's financial advisor. With respect to
financial projections and other information
provided to or otherwise discussed with A.G.
Edwards, A.G. Edwards assumed and was advised by
the senior management of Gas and Oil,
respectively, that such projections and other
information were reasonably prepared on a basis
that reflects the best currently available
estimates and judgments of the senior management
of Gas and Oil, respectively, as to the expected
future financial performance of Gas and Oil, in
each case on a stand-alone basis and after giving
effect to the Transaction. A.G. Edwards was not
engaged to, and did not, independently verify the
information provided and performed no audit of
assets or liabilities and no independent
appraisal of assets or liabilities of either Gas
or Oil. A.G. Edwards has relied upon the
assurances of the management of Gas and Oil that
they are not aware of any facts that would make
such information inaccurate or misleading.
[ ] In performing its analyses, A.G. Edwards made
numerous assumptions with respect to the propane
distribution industry and the home heating oil
distribution industry, and general business and
economic conditions which are beyond the control
of Gas and Oil. The analyses performed by A.G.
Edwards are not necessarily indicative of actual
values or actual future results, which may be
significantly more or less favorable than
suggested by such analyses. Such analyses were
prepared solely as part of A.G. Edwards'
Preliminary Report to the Special Committee.
[ ] This presentation is for the private use of the
Special Committee and may not be distributed to
any other parties without A.G. Edwards' written
permission.
Page 3
<PAGE>
REVIEW OF EVENTS TO DATE
FEBRUARY 11 [ ] A.G. Edwards presents its qualifications to the Special
Committee and its legal counsel.
MARCH 23 [ ] Special Committee engaged A.G. Edwards.
MARCH 23 [ ] A.G. Edwards met with members of Gas' and Oil's
management and submitted preliminary data request list.
[ ] A.G. Edwards began due diligence with management and
other representatives of Gas and Oil.
MARCH 30 [ ] A.G. Edwards received data related to its preliminary
data request list.
MARCH 30 [ ] A.G. Edwards continued the due diligence process with
respect to Gas and Oil.
APRIL 28 [ ] Special Committee and A.G. Edwards met to discuss the
Transaction.
MAY 7 [ ] Special Committee and A.G. Edwards met with Oil's
management and PaineWebber to discuss the Transaction.
MAY 8 [ ] A.G. Edwards continued onsite diligence at Oil
MAY 19 [ ] A.G. Edwards met with PaineWebber and Oil's management
to discuss the Transaction.
MAY 20 [ ] Special Committee meeting to discuss the Transaction.
Page 4
<PAGE>
Summary of Transaction
Pro Forma Gas Units Outstanding
(in thousands)
To simplify the complexity of the steps in the Transactions, A.G. Edwards
prepared a summary of its understanding.
[_] There are currently 6,355 Gas units outstanding comprised of 3,832
common units, 2,396 subordinated units and 127 general partner ("GP")
units. The subordinated units and GP units are assets of Oil.
[_] There are currently 26,563 shares of Oil common stock outstanding,
comprised of public shareholders and "insiders." The public holds 17,160
Class A shares. The "insiders" hold 9,404 shares which include 6,795
Class A shares, 11 Class B shares and 2,598 Class C shares.
[_] Each shareholder of Oil will receive a certain number of units in Gas
such that the implied consideration paid for each Oil share is $2.50.
Additionally, each shareholder will receive a certain number of deferred
partnership units ("DPUs") such that if each unit is converted at the
earliest possible time, then each shareholder will receive an additional
$0.65 per share in future value.
[_] The publicly held 17,160 Class A shares will initially receive .1316
shares of newly created senior subordinated units (2,258 units in total)
with an implied value (per PaineWebber) of $19.00/unit. This represents
an implied purchase price of $2.50/share for an implied total purchase
price of $42.9 million.
[_] The "insiders" of Oil, who hold a total of 9,404 shares (comprised of A,
B and C shares) will also initially receive an implied purchase price of
$2.50/share for a total of $23.5 million. The consideration received by
these shareholders will be funded by:
- (1) the distribution of existing units of Gas which are currently
owned by Oil
[_] all of the 127 GP units owned by Oil will be given as
consideration at an implied value of $22.13/unit, for a total
of $2.8 million.
[_] 524 of the 2,396 subordinated units owned by Oil will be
given as consideration at an implied value (per PaineWebber)
of $16.00/unit, for a total of $8.4 million.
- (2) the distribution of newly-created units of Gas
[_] to fund the remaining $12.3 million of the $23.5 million due
to the Oil "insiders", Gas will issue 461 newly-created
senior subordinated units and 162 newly-created GP units. The
implied values for these new units are $19.00 and $22.13,
respectively.
Page 5
<PAGE>
Summary of Transaction
Pro Forma Gas Units Outstanding
(in thousands)
(continued)
[_] Of the 2,396 subordinated units and 127 GP units owned by Oil, only
1,872 subordinated units will not have been used as consideration paid
to the "inside" Oil shareholders. Hence, these 1,872 subordinated units
will be retired by Gas. A.G. Edwards has assumed that the implied value
of these units are the same as the value PaineWebber is placing on the
subordinated units, which is $16.00/unit, for a total retired value of
approximately $30.0 million.
Page 6
<PAGE>
SUMMARY OF GAS UNITS OUTSTANDING
PRE-FINANCING ASSUMPTIONS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Distributed to Oil Issued to Oil
------------------------ -----------------------
Type of Units Current Public Insiders Public Insiders Retired Pro Forma
- ------------- ---------- -------- ----------- -------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Common 3,832 - - - - - 3,832
Senior Subordinated - - - 2,258 461 - 2,718
Subordinated 2,396 - 524 - - (1,872) 524
DPUs - - - 587 322 - 909
General Partner (a) 127 - 127 - 162 - 289
---------- -----------
6,355 8,272
</TABLE>
- --------------------------------------------------------------------------------
(a) The number of GP units issued reflects the assumption of a 6,588 common
unit equity offering to refinance certain of the assumed Oil debt and a 475
common unit equity offering to finance Gas' acquisitions. Hence, the number
of GP units reflected in the pro forma column do not equal 2% of the pro
forma outstanding units shown above but do equal exactly 2% of the pro
forma units outstanding on a post financing basis.
Page 7
<PAGE>
Equity Purchase Price Calculation
Implied Equity Value Of Oil's Assets
(units in thousands, $ in thousands, except per unit amounts)
<TABLE>
<CAPTION>
Purchase Price of Oil's Equity Purchase Price of Oil's Equity
------------------------------ --------------------------------------------------------
Value of Securities Equity Value of Oil's Value of Oil's GP and
Event Paid to Oil Shareholders Heating Oil Assets Subordinated Units in Star
- -------------------------------- --------------------------- -------------------------- -----------------------------
<S> <C> <C> <C>
Issuance of Senior Subordinated
Units to Public Oil Shareholders 2,258 x $19.00
-----------------------
$42,900 $42,900 -
Distribution of General Partner
Units to Inside Oil Shareholders 127 x $22.13
-----------------------
$2,810 - $2,810
Distribution of Subordinated
Units to Inside Oil Shareholders 524 x $16.00
-----------------------
$8,382 - $8,382
Issuance of General Partner
Units to Inside Oil Shareholders 162 x $22.13
-----------------------
$3,584 $3,584 -
Issuance of Senior Subordinated
Units to Inside Oil Shareholders 461 x $19.00
-----------------------
$8,750 $8,750 -
Issuance of DPUs 909 x $19.00
-----------------------
$17,271 $17,271
1,872 x $16.00
----------------
Retire Subordinated Units (29,954) $29,954
$42,551 $41,146
---------------------------------
-------------
Total including DPUs $83,697 $83,697
</TABLE>
- -------------------------------------------------------------------
Divided by 26,563 shares, of Oil's Common stock = $3.15 per share
- -------------------------------------------------------------------
Total excluding DPUs $66,426
- -------------------------------------------------------------------
Divided by 26,563 shares of Oil's Common stock = $2.50 per share
- -------------------------------------------------------------------
Page 8
<PAGE>
PRO FORMA WEIGHTED AVERAGE COST OF CAPITAL DERIVATION FOR COMMON UNITS
($ IN MILLIONS)
<TABLE>
- ---------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL TOTAL
MARKET TOTAL IMPLIED TOTAL DEBT AS
LEVERED VAL. UNIT UNITS MARKET DEBT/ % OF
BETA DEBT PRICE AT OUT. VALUE OF TOTAL TOTAL UNLEVERED
COMPARABLE COMPANY (A) (BK=MKT) (5/15/98) (MIL) EQUITY EQUITY CAPITAL BETA
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriGas Partners, L.P. 0.50 $701.7 $24.688 41.9 $1,055.2 66.5% 39.9% 0.300
Cornerstone Propane
Partners, L.P. 0.40 237.1 21.875 19.8 442.7 53.6% 34.9% 0.260
Ferrellgas Partners,
L.P. 0.38 537.2 21.750 31.3 694.5 77.4% 43.6% 0.214
Heritage Propane
Partners, L.P. 0.43 176.9 23.000 8.4 196.7 89.9% 47.3% 0.226
National Propane
Partners, L.P. 0.34 141.0 19.688 11.2 225.7 62.5% 38.5% 0.209
Star Gas Partners, L.P. 0.29 96.0 21.375 6.2 135.8 70.7% 41.4% 0.170
Suburban Propane
Partners, L.P. 0.35 428.2 19.063 28.7 558.8 76.6% 43.4% 0.198
---------------------------
Comparable group's average unlevered Pro forma capitalization--
beta: 0.23 at market (b)
Pro forma debt-to-equity ratio (b): 103.5% Total debt $319.0 50.8%
Pro forma debt as a percent of total
capital (b): 50.85% Total equity 308.3 49.2%
------ -----
Comparable group's beta relevered for
pro forma capital structure: 0.377 $627.3 100.0%
=======
DERIVATION OF WEIGHTED AVERAGE COST OF CAPITAL: MARKET RISK OF PREMIUM RANGE (D)
- -----------------------------------------------
11.3% 12.3% 13.3%
Pro forma theoretical levered beta: 0.377
Assumed % of equity in Pro forma capital structure
(b): 49.2%
Risk-free rate of return (c): 5.7%
Pro forma cost of equity range (at various market
risk premiums): 9.9% 10.3% 10.7%
=== ==== ====
Pro forma assumed tax rate: 35.0%
Assumed % of debt in capital structure (b): 50.8%
Pro forma estimated cost of debt (e): 8.2%
Pro forma estimated after-tax cost of debt: 5.3% 5.3% 5.3% 5.3%
--- ---- ----
Pro forma weighted average cost of capital range
(f): 7.6% 7.8% 8.0%
--- ---- ----
</TABLE>
- ------
(a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the
number of weeks available, which may be less than 143) adjusted beta
relative to the S&P 500 index.
(b) Market value of long-term debt is assumed to be equal to the book value.
(c) Ten-year Treasury rate on May 15, 1998.
(d) Ibbotson Associates 1997. Total returns for small company stocks of 17.7%
minus the risk-free rate.
(e) Based on Pro forma current debt structure.
(f) Calculation based upon use of the Capital Asset Pricing Model (CAPM).
PAGE 9
<PAGE>
PRO FORMA WEIGHTED AVERAGE COST OF CAPITAL DERIVATION FOR
SENIOR SUBORDINATED UNITS
($ IN MILLIONS)
<TABLE>
<CAPTION>
===================================================================================================================================
TOTAL IMPLIED TOTAL TOTAL
MARKET UNIT TOTAL MARKET DEBT/ DEBT AS % UN-
LEVERED VAL. DEBT PRICE AT UNITS VALUE OF TOTAL OF TOTAL LEVERED
COMPARABLE COMPANY BETA (A) (BK = MKT) (5/15/98) OUT. (MIL) EQUITY EQUITY CAPITAL BETA
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriGas Partners, L.P. 0.50 $701.7 $24.688 41.9 $,1,055.2 66.5% 39.9% 0.300
Cornerstone Propane Partners, L.P. 0.40 237.1 21.875 19.8 442.7 53.6% 34.9% 0.260
Ferrellgas Partners, L.P. 0.38 537.2 21.750 31.3 694.5 77.4% 43.6% 0.214
Heritage Propane Partners, L.P. 0.43 176.9 23.000 8.4 196.7 89.9% 47.3% 0.226
National Propane Partners, L.P. 0.34 141.0 19.688 11.2 225.7 62.5% 38.5% 0.209
Star Gas Partners, L.P. 0.29 96.0 21.375 6.2 135.8 70.7% 41.4% 0.170
Suburban Propane Partners, L.P. 0.35 428.2 19.063 28.7 558.8 76.6% 43.4% 0.198
--------------------------------------------------
Pro forma Capitalization-at market (b)
Comparable group's average unlevered beta: 0.23 Total debt $558.0 89.0%
Pro forma debt-to-equity ratio (b): 805.5% Total equity 69.3 11.0%
------ -----
$627.3 100.0%
--------------------------------------------------
Pro forma debt as a percent of total capital (b): 89.0%
Comparable group's beta relevered for Pro forma capital structure: 1.406
=====
DERIVATION OF WEIGHTED AVERAGE COST OF CAPITAL: MARKET RISK PREMIUM RANGE (D)
- ---------------------------------------------- --------------------------------------
11.3% 12.3% 13.3%
--------------------------------------
Pro forma theoretical levered beta: 1,406
Assumed % of equity in Pro forma capital structure (b): 11.0%
Risk - free rate of return (c): 5.7%
pro forma cost of equity range (at various market risk premiums): 21.6% 23.0% 24.4%
===== ===== =====
--------------------------------------
</TABLE>
____________________________________________
(a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the
number of weeks available, which may be less that 143) adjusted beta
relative to the S&P 500 index.
(b) Market value of long-term debt is assumed to be equal to the book value;
debt includes the market value of pro forma common and GP units; senior
equity includes the value of senior sub and sub units.
(c) Ten - year Treasury rate on May 15, 1998.
(d) Ibbotson Associates 1997. Total returns for small company stocks of 17.7%
minus the risk-free rate.
Page 10
<PAGE>
IMPLIED UNIT VALUES
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
1999 2000 2001 THEREAFTER COST OF EQUITY
-------- -------- -------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
COMMON UNIT
Indicated Distribution $ 2.30 $2.30 $2.30 $2.30
------------
10.3%
Discount Factor 1.10 1.22 1.34 1.34 10.3%
--------
NPV of future distributions $22.32
--------
SENIOR SUBORDINATED UNIT
Indicated Distribution $ 2.30 $2.30 $2.30 $2.30
------------
10.3%
Discount Factor 1.23 1.51 1.86 1.86 23.0%
--------
NPV of future distributions $16.63
--------
DPU
Indicated Distribution $ 0.00 $0.77 $1.53 $2.30
------------
10.3%
Discount Factor 1.23 1.51 1.86 1.86 23.0%
--------
NPV of future distributions $13.34
--------
</TABLE>
Page 11
<PAGE>
EQUITY PURCHASE PRICE CALCULATION
IMPLIED EQUITY VALUE OF OIL'S ASSETS WITH REVISED UNIT VALUES
(UNITS IN THOUSANDS, $ IN THOUSAND, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
================================================================================================================================
Purchase Price of Oil's Equity Purchase Price of Oil's Equity
-------------------------------- ---------------------------------------------------
Value of Securities Equity Value of Oil's Value of Oil's GP and
Event Paid to Oil Shareholders Heating Oil Assets Subordinated Units in Star
- --------------------------------- -------------------------------- ---------------------------------------------------
<S> <C> <C> <C>
Issuance of Senior Subordinated
Units to Public Oil Shareholders 2,258 x $16.63
--------------------------------
$37,549 $37,549 -
Distribution of General Partner
Units to Inside Oil Shareholders 127 x $22.13
--------------------------------
$ 2,810 - $2,810
Distribution of Subordinated
Units to Inside Oil Shareholders 524 x $16.63
--------------------------------
$ 8,712 - $8,712
Issuance of General Partner
Units to Inside Oil Shareholders 162 x $22.13
--------------------------------
$ 3,584 $ 3,584 -
Issuance of Senior Subordinated
Units to Inside Oil Shareholders 461 x $16.63
--------------------------------
$ 7,659 $ 7,659 -
Issuance of DPUs 909 x $13.34
--------------------------------
$12,126 $12,126
Retire Subordinated Units 1,872 x $16.00
--------------------
($29,954) $29,954
$30,964 $41,476
----------- -------------------------
Total including DPUs $72,439 $72,439
- ---------------------------------------------------------------------
Divided by 26,563 shares of Oil's Common stock = $2.73 per share
- ---------------------------------------------------------------------
Total excluding DPUs $60,313
- ---------------------------------------------------------------------
Divided by 26,563 shares of Oil's Common stock = $2.27 per share
- ---------------------------------------------------------------------
</TABLE>
Page 12
<PAGE>
EQUITY PURCHASE PRICE CALCULATION
IMPLIED EQUITY VALUE OF OIL'S ASSETS WITH REVISED DPU VALUE ONLY
(UNITS IN THOUSANDS, $ IN THOUSAND, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
===============================================================================================================================
Purchase Price of Oil's Equity Purchase Price of Oil's Equity
------------------------------------ ----------------------------------------------------
Value of Securities Equity Value of Oil's Value of Oil's GP and
Event Paid to Oil Shareholders Heating Oil Assets Subordinated Units in Star
- ----------------------------------- ------------------------------------ ----------------------- ----------------------------
<S> <C> <C> <C>
Issuance of Senior Subordinated
Units to Public Oil Shareholders 2,258 x $19.00 $42,900 -
----------------------------
$42,900
Distribution of General Partner
Units to Inside Oil Shareholders 127 x $22.13 - $2,810
----------------------------
$2,810
Distribution of Subordinated
Units to Inside Oil Shareholders 524 x $16.00
---------------------------- - $8,382
$8,382
Issuance of General Partner
Units to Inside Oil Shareholders 162 x $22.13
---------------------------- $3,584 -
$3,584
Issuance of Senior Subordinated
Units to Inside Oil Shareholders 461 x $19.00 $8,750 -
----------------------------
$8,750
Issuance of DPUs 909 x $13.34 $12,124
----------------------------
$12,124
Retire Subordinated Units 1,872 x $16.00
-------------------
($29,954) $29,954
Total including DPUs $37,404 $41,146
--------- -------------------------------
$78,550 $78,550
- ----------------------------------------------------------------------
Divided by 26,563 shares of Oil's Common stock = $2.96 per share
- ----------------------------------------------------------------------
Total excluding DPUs $66,426
- ----------------------------------------------------------------------
Divided by 26,563 shares of Oil's Common stock = $2.50 per share
- ----------------------------------------------------------------------
</TABLE>
Page 13
<PAGE>
SUMMARY OBSERVATIONS
ACCRETION/DILUTION [_] A.G. Edwards reviewed the distributable cash flow
ANALYSIS per unit and the related accretion, common unit
coverage and total unit coverage on a pro forma
basis.
[_] For the purpose of this analysis, A.G. Edwards had
PaineWebber run its pro forma financial model for
four scenarios to determine the sensitivity of
certain assumptions.
-------------------------------------------------------
ACCRETION/DILUTION ANALYSIS
Variations in Margin Growth Rates and Acquisition
Assumptions
<TABLE>
<CAPTION>
$2.50 PER SHARE OF PETRO
-------------------------------------------------------------
GAS $0.005 MARGIN GROWTH $0.00 MARGIN GROWTH
STAND-ALONE $30.0MM AT 4.75X ACQUISITIONS $30.0MM AT 5.25X ACQUISITIONS
----------- ----------------------------- -----------------------------
<S> <C> <C> <C>
DCF PER UNIT
1998E (a) $1.220 $1.580 $1.580
1998N (b) 1.760 2.420 2.420
1999P 1.900 2.730 2.440
ACCRETION/DILUTION
1999E (a) 29.5% 29.5%
1998N (b) 37.5% 37.5%
1999P 43.7% 28.4%
COMMON UNIT COVERAGE
1998E (a) 0.90x 0.94x 0.94x
1998N (b) 1.30 1.44 1.44
1999P 1.34 1.54 1.37
TOTAL UNIT COVERAGE
1998E (a) 0.55x 0.72x 0.72x
1998N (b) 0.80 1.10 1.10
1999P 0.86 1.19 1.06
LEVERAGED UNIT COVERAGE (c)
1998E (a) 0.94x 0.97x 0.97x
1998N (b) 1.15 1.20 1.20
1999P 1.17 1.25 1.17
<CAPTION>
$2.25 PER SHARE OF PETRO
------------------------------------------------------------------------------
$0.005 MARGIN GROWTH $0.000 MARGIN GROWTH
$30.0MM AT 4.75X ACQUISITIONS $30.0MM AT 5.25X ACQUISITIONS
-------------------------------- ---------------------------------
<S> <C> <C>
DCF PER UNIT
1998E (a) $1.620 $1.620
1998N (b) 2.480 2.480
1999P 2.800 2.500
ACCRETION/DILUTION
1999E (a) 32.8% 32.8%
1998N (b) 40.9% 40.9%
1999P 47.4% 31.6%
COMMON UNIT COVERAGE
1998E (a) 0.94x 0.94x
1998N (b) 1.44 1.44
1999P 1.54 1.38
TOTAL UNIT COVERAGE
1998E (a) 0.74x 0.74x
1998N (b) 1.13 1.13
1999P 1.22 1.09
LEVERAGED UNIT COVERAGE (c)
1998E (a) 0.97x 0.97x
1998N (b) 1.20 1.20
1999P 1.25 1.17
</TABLE>
-------------------------------------------------------
(a) 1998 estimate assumes no acquisitions for either
company, and is adjusted to reflect actual results
through 3/31/98.
(b) 1998 budgeted.
(c) Defined as (DCF + Int)/[((GP units + common
units)*MQD) + Int)]
<PAGE>
SUMMARY OBSERVATIONS
(continued)
PUBLIC COMPANY [_] A.G. Edwards compared certain financial and market
ANALYSIS information of Gas on both a stand-alone and pro
forma basis to that of certain public master
limited partnerships.
<TABLE>
<CAPTION>
Public Comparable Companies (a)
==================================================================================================
Public Public
Pro forma Company Company
Gas Gas Medians Ranges
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Yield 10.3% 10.8% 9.5% 8.7% to 10.7%
Firm value/LTM EBITDA 12.2x (b) 10.7x (b) 12.3x 9.1x to 18.5x
Firm value/1998 normalized EBITDA 8.8x (c) 8.0x (c) 11.0x 10.2x to 13.7x
Equity Market Cap/LTM DCF 17.6x (d) 14.0x (d) 16.0x 8.6x to 24.8x
Equity Market Cap/1998 normalized DCF 10.4x (e) 7.8x (e) 13.6x 11.6x to 16.6x
LTM common unit coverage 0.9x (f) 0.9x (f) 1.4x 0.6x to 1.5x
1998E common unit coverage 1.3x (g) 1.6x (g) 1.4x 0.9x to 1.8x
LTM total unit coverage 0.6x (f) 0.7x (f) 0.7x 0.4x to 1.1x
1998E total unit coverage 0.9x (g) 1.2x (g) 0.7x 0.7x to 1.0x
1998E leveraged unit coverage 1.2x (g)(h) 1.3x (g)(h) 1.1x 0.9x to 1.3x
--------------------------------------------------------------------------------------------------
(a) Public comparable companies include: APU, CNO, FGP, HPG, CNL and SPH.
(b) Firm value/adjusted 1998 budget EBITDA.
(c) Firm value/1999 estimated EBITDA.
(d) Equity market cap/adjusted 1998 budget EBITDA.
(e) Equity market cap/1999 estimated DCF.
(f) Adjusted 1998 budget.
(g) 1999 estimates.
(h) Defined as (DCF + interest)/(((GP units + common units*MQD)+interest).
</TABLE>
Page 15
<PAGE>
SUMMARY OBSERVATIONS
(continued)
TRANSACTION MULTIPLE [_] A.G. Edwards calculated the implied transaction
ANALYSIS multiple paid for Oil on a firm valuation basis,
including costs and certain adjustments associated
with the Transaction, and arrived at the following
multiples:
EBITDA MULTIPLE
------ --------
1997 Adjusted 8.4x
Adjusted 1998 Budget 9.7x
1999 Projected 7.3x
[_] A.G. Edwards calculated the implied transaction
multiple paid for Oil's existing heating oil
business, excluding the valuation attributable to
consolidation opportunities, and arrived at the
following multiples:
EBITDA MULTIPLE
------ --------
1997 Adjusted 5.7x
Adjusted 1998 Budget 6.5x
1999 Projected 4.9x
[_] Oil has historically paid EBITDA multiples
averaging 4.5x, with a range of 2.7x to 6.5x, for
its acquisitions.
[_] Oil has historically received EBITDA multiples
averaging 9.0x, with a range of 8.0x to 9.8x, for
certain of its heating oil businesses.
[_] Gas has historically paid EBITDA multiples
averaging 7.0x, with a range of 5.1x to 7.3x, for
its acquisitions.
Page 16
<PAGE>
SUMMARY OBSERVATIONS
(continued)
Transacton Multiple Analysis (continued)
Multiples in the Propane Industry
[_] Propane
- Average Propane Multiple 6-7x
- Current Market Multiple of EBITDA 12-13x
- Adjusted for Weather 10-11x
- Multiple Premium for Large, Multi-State Aggregators 4x
[_] Heating Oil
- Average Multiple for Heating Oil Companies 4-5x
- Multiple Premium for Large, Multi-State Aggregators 4x
- Multiple for Heating Oil Aggregator 8-9x
Page 17
<PAGE>
SUMMARY OBSERVATIONS
(continued)
DISCOUNTED CASH FLOW [_] A.G. Edwards calculated the implied present value
ANALYSIS of estimated unlevered free cash flows for Gas on
both a stand-alone and pro forma basis.
[_] Key assumptions used in the analysis were:
- Oil maintaining a flat 4.1% attrition rate;
$0.005 margin improvement; and completing $30
million in acquisitions each year at a 4.75x
EBITDA multiple.
- A 7.8% weighted average cost of capital for
both cases.
- A 10.3x terminal EBITDA multiple, representing
the current year normalized EBITDA.
<TABLE>
<CAPTION>
DISCOUNTED CASH FLOW
-----------------------------------------------------------------------------------------------------------
NET PRESENT ORIGINAL EQUITY VALUE
PRESENT CURRENT VALUE COMMON UNITS/ TO ORIGINAL
($ IN THOUSANDS) VALUE NET DEBT (a) OF EQUITY TOTAL UNITS (b) COMMON UNITS (c)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PRO FORMA $956,846 ($296,133) $660,713 26.6% $175,506
GAS STAND-ALONE $306,529 ($113,629) $192,900 60.3% $116,310
----------
Increase in value to original common unit holders: $ 59,196
==========
</TABLE>
_______________________________________________
(a) Represents total projected debt less cash as of
9/30/98.
(b) Total units include common, subordinated and GP
units.
(c) Current market value of common units is $81,909.
Page 18
<PAGE>
SUMMARY OBSERVATIONS
(continued)
COMPARATIVE STOCK [_] A.G. Edwards has compared the historical prices of
PRICE PERFORMANCE Gas' and Oil's common unit/stock to an index of
selected companies.
[_] While Gas' unit price has remained relatively flat
over the last two years, in line with the
comparable index, Oil's stock price has declined
significantly over this period.
COMPARATIVE STOCK PRICE PERFORMANCE
-------------------------------------------------------
<TABLE>
<CAPTION>
PREMIUM OF CURRENT PRICE TO PRICE
------------------------------------------------------------------------
CURRENT 2 YEARS 1 YEAR 180 DAYS 60 DAYS 30 DAYS
PRICE (b) PRIOR PRIOR PRIOR PRIOR PRIOR
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gas 21.38 6.2% 2.4% -2.8% -4.5% -2.8%
Oil 1.88 -73.1% -31.6% -38.6% 25.3% 18.2%
Composite (a) 21.68 -2.9% 5.4% -3.5% -0.5% 0.2%
</TABLE>
(a) Composite index includes the following
companies: APU, CNO, HPG, FGP, NPL, SPH.
(b) As of 5/15/98
[GRAPH OF GAS APPEARS HERE] [GRAPH OF OIL APPEARS HERE]
Page 19
<PAGE>
SUMMARY OBSERVATIONS
(continued)
EXCHANGE RATIO [_] A.G. Edwards reviewed the historical prices of
ANALYSIS Gas' and Oil's common unit/stock and the
implied historical exchange ratio.
[_] Due to the price decline of Oil's common stock
over the past year, the current exchange ratio,
based on the current consideration of $2.50 per
share and compared to the current unit/share
prices of Gas and Oil ($21.375 and $1.875,
respectively, as of May 15, 1998), represents a
premium of 33.3% to the current market price of
Oil.
[GRAPH OF EXCHANGE RATIO APPEARS HERE]
Factset: Daily
(a) Represents the current price of Gas divided by
the current price of Oil.
(b) Represents the current price of Gas divided by
the proposed $2.50 price in current
consideration offered for each share of Oil.
(c) Represents Gas' average price for the period
divided by Oil's average price for the period.
Page 20
<PAGE>
SUMMARY OBSERVATIONS
(continued)
PREMIUMS PAID ANALYSIS [_] An analysis of acquisitions of companies whose
stock traded under $5.00 per share (pre-merger)
versus companies that traded over $10.00 per
share (pre-merger) indicates a substantial
difference in the premiums paid.
[_] Normal premiums for merger of equal transactions
is -2.5% to 21.2% and normal premiums for
companies whose stock trades below $5.00 per
share is 13.5% to 81.0%.
<TABLE>
<CAPTION>
MEAN LESS ONE MEAN PLUS ONE
STANDARD DEVIATION MEAN STANDARD DEVIATION
------------------ --------- ------------------
<S> <C> <C> <C>
Merger of Equals -2.5% 9.4% 21.2%
Target Stock Price greater than $10.00 10.7% 33.2% 55.8%
Target Stock Price less than $5.00 13.5% 47.3% 81.0%
======================================================================================================
</TABLE>
Page 21
<PAGE>
Summary Observations
(continued)
Relative Contribution [_] A.G. Edwards reviewed and compared the relative
Analysis EBITDA contribution of Gas and Oil to each firms'
share of the implied combined firm value. Other
measures of relative contribution analysis were
non-meaningful.
[_] For Gas' contribution of approximately 34% of the
combined entity's EBITDA(a), it will receive
approximately 41% of the implied firm value.
EBITDA (b)
[GRAPH APPEARS HERE]
IMPLIED FIRM VALUE
SEPTEMBER 30, 1998
[PIE CHART APPEARS HERE]
___________________________________
(a) For purposes of its analysis, A.G. Edwards converted Oil's
historical December 31st fiscal year-end to a September 30th
fiscal year-end for comparison purposes. Oil's projections are
based on a December 31st calendar year end. Other measures of
relative contribution analysis are non-meaningful.
(b) Includes only heating oil EBITDA for Oil.
(c) Implied firm value of only Oil's heating oil assets.
Page 22
<PAGE>
Updated Report to Gas' Special Committee
A.G. Edwards has continued its diligence reviews of Oil and Gas, has
exchanged data and views with Oil's advisor, and has further updated
its earlier views and opinions of the Proposed Transaction. Certain
additional observations since our last meeting include:
[_] Oil continues to perform relatively better than Gas.
- Additional cost reductions at Oil should add $4.4 million
annually to Oil's ongoing EBITDA.
- Oil continues to show improvements in its attrition rate and
margin growth. YTD through 3/31/98, Oil's attrition rate was
3.3% (4.0% in January, 3.5% in February and 2.8% in March) and
its margin growth was 3.7 cents.
- Gas continues to experience much slower growth than originally
budgeted; management has revised downward its internal growth
projections and budget.
- Although not yet reflected in the market, Gas is now not
---
expecting to earn its $2.20 MQD until possibly 2003.
- Upward revisions at Oil and downward revisions at Gas now
appear to make the Proposed Transaction more accretive than
historically thought; the revisions support a 1999P DCF/share
of $2.73, which should easily support the proposed
distribution increase from $2.20 to $2.30/unit.
[_] Oil's stock price has recently improved while Gas' unit price has
declined slightly.
- Oil's stock price now trades at $2.0625/share vs.
$1.5625/share, an increase of 32.0%.
- Gas' common unit price now trades at $21.125/unit vs.
$22.125/unit, a decrease of 4.5%.
[_] An analysis of premiums paid in acquisitions of companies
whose stocks trade under $5.00 per share supports the view
that such companies generally receive a larger acquisition
premium in this inefficient sector of the market. An analysis
of transactions since 1996 indicated an average premium of
47.3% for companies whose stocks trade under $5.00/share
(normal range: 13.5% - 81.0%) compared to an average premium
of 33.2% for companies whose stocks trade over $10.00/share
(normal range: 10.7% - 55.8%).
Page 23
<PAGE>
Updated Report to Gas' Special Committee
(continued)
[_] Although A.G. Edwards cannot presently provide any opinion
regarding the Proposed Transaction, A.G. Edwards does recommend
--------------
that the Special Committee communicate to Oil and Oil's financial
advisor that the Committee is willing to move forward with the
Proposed Transaction as outlined in the "Proposal to Special
Committee, Star Gas Partners, L.P.," attached hereto in Section
VI. It is our understanding that Oil respectfully disagrees with
selected aspects of the proposal.
[_] A.G. Edwards recommends that Joel Swanson, Esq. and Baker &
Botts, LLP consult with Oil's attorneys regarding the proposed
resolution of the myriad of legal issues involving tax,
partnership and corporate compliance and the timing of the
documentation of the Transaction in terms of definitive
agreements, proxy statements and the like.
Page 24
<PAGE>
DRAFT 5/21/98
SPECIAL COMMITTEE
STAR GAS PARTNERS, L.P.
REVISED PROPOSAL
After careful consideration of the Proposed Transaction and the views
expressed by Petro and PaineWebber, the Special Committee and its advisors
recommend that further refinement and evaluation of the Proposed Transaction is
appropriate.
Subject to further diligence and assuming no material adverse changes in
Star or Petro, or in market conditions, the Special Committee proposes that the
transaction contain the following safeguards for the benefit of Star's common
unitholders:
(A) Star Partnership Agreement. Appropriate steps should be initiated to
--------------------------
amended the Star Partnership Agreement as of the closing date (assumed
to be September 30, 1998) in order to include as a minimum:
(A-1) authorizing the creation of new classes of senior
subordinated units and deferred partnership units, which
shall be junior to all present and future common units;
(A-2) prohibiting the payment of any distributions to senior
subordinated unitholders and to subordinated unitholders
except from net distributable cash flow available from the
preceding twelve months after first paying $2.30 per unit
to the common unitholders for such period plus any
cumulative common unit arrearages from prior period(s); and
(A-3) providing a surplus available for common unit distributions
equal to $1.10 per new common unit, as part of the
Refinancing Transaction (described below).
(B) Definitive Transaction Agreement. A draft of the definitive
--------------------------------
transaction agreement should be prepared by Petro for Special
Committee's careful consideration (and for future submission to the
Board of Directors and common unitholders of Star and to the Board of
Directors and shareholders of Petro for approval) setting forth at
least the following steps:
(B-1) At closing of the Transaction, Star shall be obligated to
deliver to Petro's common shareholders, subject to
reduction by the Revision Amount as defined in (B-4) below,
the following:
(A) 2,718,000 senior subordinated units of Star;
<PAGE>
(B) 524,000 subordinated units of Star; the balance must be
delivered to Star free and clear for retirement;
(C) 289,000 GP units of Star; and
(D) 909,000 deferred partnership units of Star, convertible into
senior subordinated units at 33 1/3% per annum for each year
in which Petro's after-tax income contributes accretion to
every Star unit in excess of [$0.50].
(B-2) The Closing shall be contingent upon the successful completion of
the following (collectively, the "Refinancing Transaction"):
(A) The issuance of no more than 6,588,000 new common units at a
price per unit of at least $21 with a gross spread of no
greater than 5.0%, and
(B) The issuance of $125,000,000 new debt with an interest rate
no higher than [8.5%] with a gross spread of no greater than
3.0%.
The use of proceeds of the Refinancing Transaction shall be
solely to refinance certain of the outstanding indebtedness
assumed from Petro.
(B-3) Prior to the closing of the Transaction, Petro shall represent,
warrant and agree that:
(A) Prior to the Refinancing Transaction, Petro shall have a
balance of debt and preferred stock (at redemption value),
less any cash balance in excess of such amounts required in
(B-3) (B) below, of no more than $331,367,000.
(B) Petro shall have a minimum cash balance of $500,000, a
positive working capital balance, and a total stockholders'
deficit on its balance sheet of no greater than [$__
million], all as of the Closing.
(C) Petro shall set up appropriate reserves and fund all of the
following transactions costs: the gross spread on the
issuance of the new debt referred to in (B-2) (B); financial
advisory fees and fairness opinions for Petro and Star;
legal, accounting and printing fees for Petro and Star; all
exchange and solicitation fees related to the retirement or
redemption of Petro's debt and preferred stock; all
appraisals and environmental reports; all rating agencies
and bank fees; and all other out-of-pocket costs and
expenses associated with the Transaction.
(B-4) In the event Petro is unable or unwilling to represent and
warrant each of the matters set forth in (B-3), then a Revision
Amount
<PAGE>
(defined below) will be established. The Revision Amount shall
reduce, on a dollar-for-dollar basis, the number of senior
subordinated units of Star to be delivered to Petro's common
shareholders as set forth in (B-1)(A) with each senior
subordinated unit deemed to equal $19/unit.
The Revision Amount shall be the difference between the net sum
of monies referred to in (B-3) (A), (B) and (C) above that are
transferred to Star at Closing compared to the defined or stated
amounts in (B-3). If the Revision Amount is negative, then the
Revision Amount will be considered to equal zero.
In the event the Revision Amount exceeds [$__million], Star shall
not be obligated to proceed.
(B-5) Prior to the Closing of the Transaction, Petro shall not declare
or distribute any cash dividends to its common shareholders.
<PAGE>
Round III
Appendices to
PRELIMINARY REPORT TO
THE SPECIAL COMMITTEE OF GAS
ANALYSES PERFORMED AT "$2.50 PER SHARE" PLUS ISSUANCE OF DPUS
A.G.EDWARDS & SONS, INC.
INVESTMENT BANKING
May 21, 1998
<PAGE>
OVERVIEW OF OIL
EBITDA RECONCILIATION: 1997 (a)
<TABLE>
<CAPTION>
====================================================================================
OIL
---
<S> <C>
1997 Actual EBITDA $36,010
NORMALIZING ADJUSTMENTS:
Weather was 3.8% warmer than 30-year normal
3.8% of 1997 budgeted retail gallons 13,482 gallons
Gross profit margin $0.4545
Delivery and garage cost savings ($0.0814)
-------
Net impact per gallon $0.3731
$ impact 5,030
Insurance reserve 2,000
-------
1997 Adjusted EBITDA $43,040
=======
</TABLE>
_________________________________________________________________________
(a) Management's assumptions.
Page 1
<PAGE>
OVERVIEW OF OIL
EBITDA RECONCILIATION: 1997-1998 (a)
(continued)
<TABLE>
<CAPTION>
=======================================================================================================
OIL
---
<S> <C> <C>
1997 Adjusted EBITDA $43,040
Volume Adjustments for 1998
Sale of TLC Division in 1997 (16,926) gallons
Attrition in 1998 (4.1%) (17,375)
1997 Acquisitions 9,828
---------
(24,473) gallons
@
$0.1700/gallon (b) (4,159)
Gross Profit Margin Increase $0.006 per gallon on 395,086 gallons (c) 2,371
Inflation (3,662)
Operating Cost Reductions (d) 5,850
-------
Original 1998 EBITDA Budget $43,440
=======
</TABLE>
_______________________________________________________________________________
(a) Management's assumptions.
(b) Represents the average gross profit per gallon ($.4700 per gallon) offset
by $.30 per gallon reduction in operating expenses.
(c) Actual gross profit margin increase achieved in first quarter of 1998 was
$5.9 million (156 million gallons @ $0.037/gallon).
(d) Represents already accomplished reductions as of 12/31/97 in branch,
regional and corporate expenses in excess of normal indexing related to
volume reductions as well as 1% productivity improvements.
Page 2
<PAGE>
OVERVIEW OF OIL
EBITDA RECONCILIATION: 1998 (a)
(continued)
- --------------------------------------------------------------------------------
OIL
---
Original 1998 EBITDA Budget $43,440
Non-Budgeted Operating Expense Eliminations (b) 2,249
-----
Revised 1998 EBITDA Budget 45,689
Actual Differential between first three months
of Fiscal 1998 vs. Budget (10,834)
Revised margin improvement based on results
from the first three months of Fiscal 1998 2,600
-----
Adjusted 1998 EBITDA Budget $37,455
======
- -------------------------------------------------------------------------------
(a) Management's assumptions.
(b) Represent specific operating expense eliminations that are already
accomplished.
Page 3
<PAGE>
OVERVIEW OF OIL
EBITDA RECONCILIATION
Non-budgeted Operating Expense Eliminations
<TABLE>
<CAPTION>
Base % Applicable 1999
Expense To 1998 1998 Thereafter
------- ------------ ---- ----------
<S> <C> <C> <C> <C>
Exton PA Facility Rent $ 500 20% $ 100 $ 500
Corporate Staff Reductions - Salary & Benefits
Alex Tyshovnytsky 310 75% 233 310
Allen Levenson 279 75% 209 279
Joe Massoud 310 67% 207 310
Total Staff Reductions 900 649 900
Wage Freeze - Non-Union 2,000 50% 1,000 - (a)
Wage Freeze - Union 1,000 50% 500 -
------ ------ ------
Total $4,400 $2,249 $1,400
</TABLE>
_______________________________________________________________________
(a) Non-Union and Union wage freeze is incorporated via inflation adjustment
in Oil model for 1999 and is not incorporated for 2000 on.
Page 4
<PAGE>
OVERVIEW OF OIL
EBITDA RECONCILIATION: 1998-1999(a)
(continued)
- --------------------------------------------------------------------------------
OIL
---
Original 1998 EBITDA Budget $43,440
$0.01 Margin Increase in 1999 partially offset by
Internal Attrition (4.1%) 1,608
Non-Budgeted Operating Expense Eliminations 1,400
Acquisition Growth
$30,000 of acquisitions at 4.75x multiple
using half-year convention 3,158
------
1999 Projection $49,606
======
- --------------------------------------------------------------------------------
(a) Management's assumptions.
Page 5
<PAGE>
OVERVIEW OF OIL
EBITDA SUMMARY
<TABLE>
<CAPTION>
================================================================================
OIL
---
<S> <C>
1997 Actual $36,010
1997 Adjusted $43,040
Original 1998 Budget $43,440
Revised 1998 Budget $45,689
Adjusted 1998 Budget $37,455
1999E $49,606
</TABLE>
- --------------------------------------------------------------------------------
Page 6
<PAGE>
OVERVIEW OF GAS
EBITDA RECONCILIATION: 1997(a)
($ IN THOUSANDS)
<TABLE>
<CAPTION>
================================================================================
GAS
---
<S> <C>
1997 Actual EDITBA $19,703(b)
NORMALIZING ADJUSTMENTS:
Weather
Residential - 1,125 gallons @ 0.7106 margin 799
Commercial - 277 gallons @ 0.4459 margin 124
Margin
Residential - 50,832 gallons @ (0.7106 - 0.6995) (564)
Commercial - 19,864 gallons @ (0.4454 - 0.4348) (220)
Wholesale - 38,404 gallons @ (0.0975 - 0.0675) (1,152)
Compensation (56)
Elimination of strategic expense 902(c)
Pearl Gas EBITDA 3,012
Pearl Gas acquisition adjustments 273(d)
------
1997 Adjusted EDITBA $22,821
======
- --------------------------------------------------------------------------------
</TABLE>
(a) Management's assumptions.
(b) Not pro forma for Pearl Gas acquisition.
(c) Certain expenses including the exploration of strategic alternatives by
Morgan Stanley.
(d) Certain cost savings, primarily salary and benefit expenses of certain
selling shareholders.
Page 7
<PAGE>
Overview of Gas
EBITDA Reconciliation: 1997 - 1999(a)
($ in thousands)
(continued)
<TABLE>
<CAPTION>
-----------------------------------------------------------------
GAS
---
<S> <C>
Revised 1998 EBITDA Budget $ 21,730
Approximate Differential between first six
months of Fiscal 1998 vs. Budget (3,451)
--------
Adjusted 1998 EBITDA Budget $ 18,279
========
1998 EBITDA Budget $ 21,730
Acquisition Growth
$20 million of acquisitions at 7x multiple
completed on 9/30/98 2,857
$10 million of acquisitions at 7x multiple
completed on 4/1/99 using half-year
convention 712
--------
1999 EBITDA Projection $ 25,299
========
</TABLE>
-----------------------------------------------------------------
(a) Management's assumptions.
Page 8
<PAGE>
SUMMARY OF TRANSACTION
PRO FORMA GAS UNITS OUTSTANDING
(IN THOUSANDS)
TO SIMPLIFY THE [_] There are currently 6,355 Gas units
COMPLEXITY OF THE STEPS outstanding comprised of 3,832 common units,
IN THE TRANSACTION, 2,396 subordinated units and 127 general
A.G. EDWARDS PREPARED partner ("GP") units. The subordinated units
A SUMMARY OF ITS and GP units are assets of Oil.
UNDERSTANDING.
[_] There are currently 26,563 shares of Oil
common stock outstanding, comprised of public
shareholders and "insiders." The public holds
17,160 Class A shares. The "insiders" hold
9,404 shares which include 6,795 Class A
shares, 11 Class B shares and 2,598 Class C
shares.
[_] Each shareholder of Oil will receive a
certain number of units in Gas such that the
implied consideration paid for each Oil share
is $2.50. Additionally, each shareholder will
receive a certain number of deferred
partnership units ("DPUs") such that if each
unit is converted at the earliest possible
time, then each shareholder will receive an
additional $0.65 per share in future value.
[_] The publicly held 17,160 Class A shares will
initially receive .1316 shares of newly
created senior subordinated units (2,258
units in total) with an implied value (per
PaineWebber) of $19.00/unit. This represents
an implied purchase price of $2.50/share for
an implied total purchase price of $42.9
million.
[_] The "insiders" of Oil, who hold a total of
9,404 shares (comprised of A, B and C shares)
will also initially receive an implied
purchase price of $2.50/share for a total of
$23.5 million. The consideration received by
these shareholders will be funded by:
- (1) the distribution of existing units
of Gas which are currently owned by
Oil
[_] all of the 127 GP units owned
by Oil will be given as
consideration at an implied
value of $22.13/unit, for a
total of $2.8 million.
[_] 524 of the 2,396 subordinated
units owned by Oil will be
given as consideration at an
implied value (per
PaineWebber) of $16.00/unit,
for a total of $8.4 million.
- (2) the distribution of newly-created
units of Gas
[_] to fund the remaining $12.3
million of the $23.5 million
due to the Oil "insiders", Gas
will issue 461 newly-created
senior subordinated units and
162 newly-created GP units.
The implied values for these
new units are $19.00 and
$22.13, respectively.
Page 31
<PAGE>
SUMMARY OF TRANSACTION
PRO FORMA GAS UNITS OUTSTANDING
(IN THOUSANDS)
(continued)
[_] Of the 2,396 subordinated units and 127 GP
units owned by Oil, only 1,872 subordinated
units will not have been used as
consideration paid to the "inside" Oil
shareholders. Hence, these 1,872 subordinated
units will be retired by Gas. A.G. Edwards
has assumed that the implied value of these
units are the same as the value PaineWebber
is placing on the subordinated units, which
is $16.00/unit, for a total retired value of
approximately $30.0 million.
Page 32
<PAGE>
Summary of Gas Units Outstanding
Pre-Financing Assumptions
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Distributed to Oil Issued to Oil
---------------------- -------------------
Type of Units Current Public Insiders Public Insiders Retired Pro Forma
--------------------- --------- ---------- ---------- -------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Common 3,832 - - - - - 3,832
Senior Subordinated - - - 2,258 461 - 2,718
Subordinated 2,396 - 524 - - (1,872) 524
DPUs - - - 587 322 - 909
General Partner (a) 127 - 127 - 162 - 289
--------- -----------
6,355 8,272
--------------------------------------------------------------------------------------------------
</TABLE>
____________________________________
(a) The number of GP units issued reflects the assumption of
a 6,588 common unit equity offering to refinance certain
of the assumed Oil debt and a 475 common unit equity
offering to finance Gas' acquisitions. Hence, the number
of GP units reflected in the pro forma column do not
equal 2% of the pro forma outstanding units shown above
but do equal exactly 2% of the pro forma units
outstanding on a post financing basis.
Page 11
<PAGE>
EQUITY PURCHASE PRICE CALCULATION
IMPLIED EQUITY VALUE OF OIL'S ASSETS
(UNITS IN THOUSANDS, $ IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PURCHASE PRICE OF OIL'S
EQUITY PURCHASE PRICE OF OIL'S EQUITY
------------------------ ------------------------------------------------
VALUE OF SECURITIES EQUITY VALUE OF OIL'S VALUE OF OIL'S GP AND
EVENT PAID TO OIL SHAREHOLDERS HEATING OIL ASSETS SUBORDINATED UNITS IN STAR
- ----------------------- ------------------------ --------------------- --------------------------
<S> <C> <C> <C>
Issuance of Senior
Subordinated
Units to Public Oil
Shareholders 2,258 x $19.00
----------------
$42,900 $42,900 --
Distribution of General
Partner
Units to Inside Oil
Shareholders 127 x $22.13
----------------
$2,810 -- $2,810
Distribution of
Subordinated
Units to Inside Oil
Shareholders 524 x $16.00
----------------
$8,382 -- $8,382
Issuance of General
Partner
Units to Inside Oil
Shareholders 162 x $22.13
----------------
$3,584 $3,584 --
Issuance of Senior
Subordinated
Units to Inside Oil
Shareholders 461 x $19.00
----------------
$8,750 $8,750 --
Issuance of DPUs 909 x $19.00
----------------
$17,271 $17,271 --
Retire Subordinated
Units ($29,954) 1,872 x $16.00
--------------
$29,954
$42,551 $41,146
---------------------------
Total including DPUs
----------------
$83,697 $83,697
</TABLE>
- ------------------------------------------------------
Divided by 26,563 shares of Oil's Common stock= $3.15 per share
- ------------------------------------------------------
Total excluding DPUs $66,426
- ------------------------------------------------------
Divided by 26,563 shares of Oil's Common stock= $2.50 per share
- ------------------------------------------------------
PAGE 12
<PAGE>
PRO FORMA WEIGHTED AVERAGE COST OF CAPITAL DERIVATION FOR COMMON UNITS
($ IN MILLIONS)
<TABLE>
- -----------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL TOTAL
MARKET TOTAL IMPLIED TOTAL DEBT AS
LEVERED VAL. UNIT UNITS MARKET DEBT/ % OF
BETA DEBT PRICE AT OUT. VALUE OF TOTAL TOTAL UNLEVERED
COMPARABLE COMPANY (A) (BK=MKT) (5/15/98) (MIL) EQUITY EQUITY CAPITAL BETA
- ------------------ ------- -------- --------- ----- -------- ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriGas Partners, L.P. 0.50 $701.7 $24.688 41.9 $1,055.2 66.5% 39.9% 0.300
Cornerstone Propane
Partners, L.P. 0.40 237.1 21.875 19.8 442.7 53.6% 34.9% 0.260
Ferrellgas Partners,
L.P. 0.38 537.2 21.750 31.3 694.5 77.4% 43.6% 0.214
Heritage Propane
Partners, L.P. 0.43 176.9 23.000 8.4 196.7 89.9% 47.3% 0.226
National Propane
Partners, L.P. 0.34 141.0 19.688 11.2 225.7 62.5% 38.5% 0.209
Star Gas Partners, L.P. 0.29 96.0 21.375 6.2 135.8 70.7% 41.4% 0.170
Suburban Propane
Partners, L.P. 0.35 428.2 19.063 28.7 558.8 76.6% 43.4% 0.198
---------------------------
Comparable group's average unlevered Pro forma capitalization--
beta: 0.23 at market (b)
Pro forma debt-to-equity ratio (b): 103.5% Total debt $319.0 50.8%
Pro forma debt as a percent of total
capital (b): 50.8% Total equity 308.3 49.2%
------ -----
Comparable group's beta relevered for
Pro forma capital structure: 0.377 $627.3 100.0%
=======
DERIVATION OF WEIGHTED AVERAGE COST OF CAPITAL: MARKET RISK OF PREMIUM RANGE (D)
- ----------------------------------------------- --------------------------------
11.3% 12.3% 13.3%
Pro forma theoretical levered beta: 0.377
Assumed % of equity in Pro forma capital structure
(b): 49.2%
Risk-free rate of return (c): 5.7%
Pro forma cost of equity range (at various market
risk premiums): 9.9% 10.3% 10.7%
==== ==== ====
Pro forma assumed tax rate: 35.0%
Assumed % of debt in capital structure (b): 50.8%
Pro forma estimated cost of debt (e): 8.2%
Pro forma estimated after-tax cost of debt: 5.3% 5.3% 5.3% 5.3%
-------- ----- -----
Pro forma weighted average cost of capital range
(f): 7.6% 7.8% 8.0%
-------- ----- -----
</TABLE>
- ------
(a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the
number of weeks available, which may be less than 143) adjusted beta
relative to the S&P 500 index.
(b) Market value of long-term debt is assumed to be equal to the book value.
(c) Ten-year Treasury rate on May 15, 1998.
(d) Ibbotson Associates 1997. Total returns for small company stocks of 17.7%
minus the risk-free rate.
(e) Based on Pro forma current debt structure.
(f) Calculation based upon use of the Capital Asset Pricing Model (CAPM).
PAGE 13
<PAGE>
PRO FORMA WEIGHTED AVERAGE COST OF CAPITAL DERIVATION FOR
SENIOR SUBORDINATED UNITS
($ IN MILLIONS)
<TABLE>
<CAPTION>
====================================================================================================================================
Total Implied Total Total
Market Unit Total Market Debt/ Debt as % Un-
Levered Val. Debt Price at Units Value of Total of Total levered
Comparable Company Beta(a) (Bk = Mt) (5/15/98) Out. (Mil) Equity Equity Capital Beta
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriGas Partners, L.P. 0.50 $701.7 $24.688 41.9 $1,055.2 66.5% 39.9% 0.300
Cornerstone Propane Partners, L.P. 0.40 237.1 21.875 19.8 422.7 53.6% 34.9% 0.260
Ferrellgas Partners, L.P. 0.38 537.2 21.750 31.3 694.5 77.4% 43.6% 0.214
Heritage Propane Partners, L.P. 0.43 176.9 23.000 8.4 196.7 89.9% 47.3% 0.226
National Propane Partners, L.P. 0.34 141.0 19.688 11.2 225.7 62.5% 38.5% 0.209
Star Gas Partners, L.P. 0.29 96.0 21.375 6.2 135.8 70.7% 41.4% 0.170
Suburban Propane Partners, L.P. 0.35 428.2 19.063 28.7 558.8 76.6% 43.4% 0.198
--------------------------------------------------------
Pro forma capitalization - at market (b)
Comparable group's average unlevered beta: 0.23 Total debt $558.0 89.0%
Pro forma debt-to-equity ratio (b): 805.5% Total equity 69.3 11.0%
------ -----
Pro forma debt as a percent of total capital (b): 89.0% $627.3 100.0%
---------------------------------------------------------
Comparable group's beta relevered for Pro forma
capital structure: 1.406
=====
DERIVATION OF WEIGHTED AVERAGE COST OF CAPITAL:
- -----------------------------------------------
Market Risk Premium Range (d)
-----------------------------------------------
11.3% 12.3% 13.3%
-----------------------------------------------
Pro forma theoretical levered beta: 1.406
Assumed % of equity in Pro forma capital structure (b): 11.0%
Risk-free rate of return (c): 5.7%
Pro forma cost of equity range (at various market risk premiums): 21.6% 23.0% 24.4%
==== ==== ====
-----------------------------------------------
</TABLE>
___________________________
(a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the
number of weeks available, which may be less than 143) adjusted beta
relative to the S&P 500 index.
(b) Market value of long-term debt is assumed to be equal to the book value;
debt includes the market value of pro forma common and GP units; equity
includes the value of senior sub and sub units.
(c) Ten - year Treasury rate on May 15, 1998.
(d) Ibbotson Associates 1997. Total returns for small company stocks of 17.7%
minus the risk-free rate.
Page 14
<PAGE>
IMPLIED UNIT VALUES
<TABLE>
<CAPTION>
====================================================================================================
1999 2000 2001 THEREAFTER COST OF EQUITY
------ ------ ------ ---------- ----------------
<S> <C> <C> <C> <C> <C>
COMMON UNIT
Indicated Distribution $ 2.30 $2.30 $2.30 $ 2.30
----------
10.3 %
Discount Factor 1.10 1.22 1.34 1.34 10.3%
--------
NPV of future distributions $22.32
--------
SENIOR SUBORDINATED UNIT
Indicated Distribution $ 2.30 $2.30 $2.30 $ 2.30
----------
10.3 %
Discount Factor 1.23 1.51 1.86 1.86 23.0%
--------
NPV of future distributions $16.63
--------
DPU
Indicated Distribution $ 0.00 $0.77 $1.53 $ 2.30
----------
10.3 %
Discount Factor 1.23 1.51 1.86 1.86 23.0%
--------
NPV of future distributions $13.34
--------
</TABLE>
Page 15
<PAGE>
EQUITY PURCHASE PRICE CALCULATION
IMPLIED EQUITY VALUE OF OIL'S ASSETS WITH REVISED UNIT VALUES
(UNITS IN THOUSANDS, $ IN THOUSAND, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
===================================================================================================================================
Purchase Price if Oil's Equity Purchase Price of Oil's Equity
------------------------------ -------------------------------------------------------
Value of Securities Equity Value of Oil's Value of Oil's GP and
Event Paid to Oil Shareholders Heating Oil Assets Subordinated Units in Star
- ---------------------------------- ------------------------------ --------------------- --------------------------
<S> <C> <C> <C>
Issuance of Senior Subordinated
Units to Public Oil Shareholders 2,258 X $16.63
------------------------------
$37,549 $37,549 -
Distribution of General Partner
Units to Inside Oil Shareholders 127 X $22.13
------------------------------
$ 2,810 - $ 2,810
Distribution of Subordinated
Units to Inside Oil Shareholders 524 X $16.63
------------------------------
$ 8,712 - $ 8,712
Issuance of General Partner
Units to Inside Oil Shareholders 162 X $22.13
------------------------------
$ 3,584 $ 3,584 -
Issuance of Senior Subordinated
Units to Inside Oil Shareholders 461 X $16.63
------------------------------
$ 7,659 $ 7,659 -
Issuance of DPUs 909 X $13.34
------------------------------
$12,126 $12,126
Retire Subordinated Units 1,872 X $16.00
--------------------------
($29,954) $29,954
$30,964 $41,476
------------- ------------------------------
Total including DPUs $72,439 $72,439
- ------------------------------------------------------------------
Divided by 26,563 shares of Oil's Common
stock = $ 2.73 per share
- ------------------------------------------------------------------
Total excluding DPUs $60,313
- ------------------------------------------------------------------
Divided by 26,563 shares of Oil's Common
stock = $ 2.27 per share
- ------------------------------------------------------------------
</TABLE>
Page 16
<PAGE>
EQUITY PURCHASE PRICE CALCULATION
IMPLIED EQUITY VALUE OF OIL'S ASSETS WITH REVISED DPU VALUE ONLY
(UNITS IN THOUSANDS, $ IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Purchase Price of Oil's Equity Purchase Price of Oil's Equity
------------------------------ ----------------------------------------------------
Value of Securities Equity Value of Oil's Value of Oil's GP and
Event Paid to Oil Shareholders Heating Oil Assets Subordinated Units in Star
- ----- ------------------------------ --------------------- --------------------------
<S> <C> <C> <C>
Issuance of Senior Subordinated
Units to Public Oil Shareholders 2,258 x $19.00
--------------------
$42,900 $42,900 -
Distribution of General Partner
Units to Inside Oil Shareholders 127 x $22.13
--------------------
$2,810 - $2,810
Distribution of Subordinated
Units to Inside Oil Shareholders 524 x $16.00
--------------------
$8,382 - $8,382
Issuance of General Partner
Units to Inside Oil Shareholders 162 x $22.13
--------------------
$3,584 $3,584 -
Issuance of Senior Subordinated
Units to Inside Oil Shareholders 461 x $19.00
--------------------
$8,750 $8,750 -
Issuance of DPUs 909 x $13.34
--------------------
$12,124 $12,124 -
Retire Subordinated Units 1,872 x $16.00
------------------
($29,954) ($29,954)
$37,404 $41,146
-------------------- ------------------------------
Total including DPUs $78,550 $78,550
- -----------------------------------------------------------------
Divided by 26,563 shares of Oil's Common stock = $2.96 per share
- -----------------------------------------------------------------
Total excluding DPUs $66,426
- -----------------------------------------------------------------
Divided by 26,563 shares of Oil's Common stock = $2.50 per share
- -----------------------------------------------------------------
</TABLE>
Page 17
<PAGE>
PREMIUM PAID ANALYSIS
<TABLE>
<CAPTION>
=====================================================================================================================
Dollars
Stock Price Premium Analysis (a) in thousands Notes
- ------------------------------------------------- ------------ -------------------------------------------------
<S> <C> <C>
Equity purchase price of Oil $ 66,426 $2.50 share price x 26,563 shares.
Premium to stock price one day prior 33.3% $1.875 close on May 15, 1998.
Premium to stock price one month prior 56.9%
Premium to stock price three months prior -2.4%
Premium to stock price six months prior -18.4%
Purchase Price
- -------------------------------------------------
Equity purchase price of heating oil assets
including DPUs $ 37,404 DPU value revised only. See page 17.
Debt assumption value (b) 326,120
--------
Aggregate purchase price of heating oil assets $363,524
========
Multiples
- ------------------------------------------------- -------------
Multiples Notes
------------- ----------------------------------------------
1997 Revenue $548,141 0.7 x As a multiple of aggregate transaction value.
1997 EBITDA (c) 36,010 10.1 As a multiple of aggregate transaction value.
1997 EBIT (d) 6,264 58.0 As a multiple of aggregate transaction value.
1997 Net loss to common shares (d) (19,338) NM As a multiple of equity value.
Equity (c) (177,033) NM As a multiple of equity value.
1997 Adjusted EBITDA (c) 43,040 8.4 x As a multiple of aggregate transaction value.
Revised 1998 EBITDA budget (c) 45,689 8.0 As a multiple of aggregate transaction value.
Adjusted 1998 EBITDA budget (c) 37,455 9.7 As a multiple of aggregate transaction value.
1999P EBITDA (c) 49,606 7.3 As a multiple of aggregate transaction value.
</TABLE>
________________________________
(a) Updated through May 15, 1998.
(b) Includes cost of debt at assumed redemption value, preferred stock at
assumed redemption value, net of excess cash. See page 19.
(c) Calculated as gross profit minus SG&A expense and direct delivery expense.
(d) Excludes restructuring charge, pension curtailment expense, provision for
supplemental benefits and corporate identity expenses.
(e) As of 12/31/97.
Page 18
<PAGE>
TRANSACTION MULTIPLE ANALYSIS
FIRM VALUATION
($ IN THOUSANDS)
<TABLE>
=============================================================================================================================
<S> <C> <C>
Equity Purchase Price of Heating Oil Assets including DPUs $37,404 Revised DPU Value
------
+ Cost of Debt at Redemption Value 290,992
+ Cost of Preferred stock at Redemption Value 34,375
326,120
-------
+ Off-Balance Sheet Pension and Tax Liability 8,500
- - Cash (a)
Required cash on hand (500)
Required Additional Surplus (7,247) (7,747)
------
---------
Firm Value $ 363,524
=========
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes that $500,000 plus an additional surplus of $1.10 per new commom
unit issued is funded by Oil and delivered to Gas at closing.
Page 19
<PAGE>
TRANSACTION MULTIPLE ANALYSIS
TRANSACTION MULTIPLES FOR FIRM VALUATION
($ IN THOUSANDS)
<TABLE>
<CAPTION>
==============================================================================
EBITDA
---------------------------------------
Purchase Price Year Amount Multiple Paid
- -------------- -------------- ----------------- --------------
<S> <C> <C> <C>
$363,524 1997 Adjusted $43,040 8.4x
$363,524 Revised 1998 Budget $45,689 8.0x
$363,524 Adjusted 1998 Budget $37,455 9.7x
$363,524 1999 Projected $49,606 7.3x
</TABLE>
Page 20
<PAGE>
TRANSACTION MULTIPLE ANALYSIS
DISTRIBUTION OF VALUE
<TABLE>
<CAPTION>
=====================================================================================================
OIL
1997 Adjusted EBITDA
EBITDA Multiple Purchase Price
------------- --------- --------------
<S> <C> <C>
$43,040 8.4x $363,524
</TABLE>
<TABLE>
<CAPTION>
ABILITY TO FURTHER CONSOLIDATE HEATING OIL INDUSTRY CORE BUSINESS
--------------------------------------------------- -------------
<S> <C> <C> <C>
Acquisition EBITDA $ 43,040
EBITDA Multiple Purchase Price EBITDA Decline Rate 7.75% (a)
------------ ----------- --------------
WACC 7.79% (b)
$6,316 4.8x $ 30,000
Decline Rate 7.75% (a)
WACC 7.79% (b)
Perpetuity $ 40,637
Purchase Price $ 30,000
--------------
Net Present Value of the
Heating Oil Acq. $ 10,637
Value in perpetuity of Ability to
-------------- ---------
Consolidate Heating Oil Industry $136,506 Value of Core Business $ 276,925
============== =========
-------------+-----------------------------------
----------------------------------------------------------------------------
Implied Total Valuation $413,431
% of Valuation attributable to core business 67.0%
% of Valuation attributable to consolidation opportunities 33.0%
----------------------------------------------------------------------------
</TABLE>
(a) A.G. Edwards' estimate of the decline rate of EBITDA based on a 4.1%
attribution rate.
(b) See page 13.
Page 21
<PAGE>
TRANSACTION MULTIPLE ANALYSIS
TRANSACTION MULTIPLES FOR EXISTING HEATING OIL BUSINESS
($ IN THOUSANDS)
================================================================================
Revised EBITDA
-------------------------------------
Purchase Price(a) Year Amount Multiple Paid
- ----------------- -------------------- -------------- ---------------
$243,496 1997 Adjusted $43,040 5.7x
$243,496 Revised 1998 Budget $45,689 5.3x
$243,496 Adjusted 1998 Budget $37,455 6.5x
$243,496 1999 Projected $49,606 4.9x
________________________________________________________________________________
(a) Represents A.G. Edwards' estimate of the portion of the $363.5 million price
being paid for Oil's heating oil business that can be attributable to its
core business. Calculation: $363.5 million X 67.0%. See page 21.
Page 22
<PAGE>
RELATIVE CONTRIBUTION ANALYSIS(a)
($ IN THOUSANDS)
GAS' AVERAGE EBITDA
CONTRIBUTION
96-97 35.4%
EBITDA(b)
98-99 33.4%
[PIE CHART APPEARS HERE]
96-99 34.3%
FOR GAS' CONTRIBUTION
OF APPROXIMATELY 34% OF IMPLIED FIRM VALUE
THE COMBINED ENTITY'S SEPTEMBER 30, 1998
EBITDA, IT WILL RECEIVE
APPROXIMATELY 41% OF [PIE CHART APPEARS HERE]
THE IMPLIED FIRM VALUE.
_______________________________
(a) For purposes of its analysis, A.G. Edwards converted Oil's historical
December 31st fiscal year-end to a September 30th fiscal year-end for
comparison purposes. Oil's projections are based on a December 31st calendar
year end. Other measures of relative contribution analysis are non-
meaningful.
(b) Includes only heating oil EBITDA for Oil.
(c) Implied firm value of only Oil's heating oil assets.
Page 23
<PAGE>
ACCRETION/DILUTION ANALYSIS
VARIATIONS IN MARGIN GROWTH RATES AND ACQUISITION ASSUMPTIONS
<TABLE>
<CAPTION>
=============================================================================================================
$2.50 PER SHARE OF PETRO
---------------------------------------------------------------------
GAS $0.005 MARGIN GROWTH $0.00 MARGIN GROWTH
STAND-ALONE $30.0MM AT 4.75X ACQUISITIONS $30.0MM AT 5.25X ACQUISITIONS
----------- ----------------------------- ----------------------------------
<S> <C> <C> <C>
DCF PER UNIT
1998E (a) $1.220 $1.580 $1.580
1998N (b) 1.760 2.420 2.420
1999P 1.900 2.730 2.440
ACCRETION/DILUTION
1998E (a) 29.5% 29.5%
1998N (b) 37.5% 37.5%
1999P 43.7% 28.4%
COMMON UNIT COVERAGE
1998E (a) 0.90x 0.94x 0.94x
1998N (b) 1.30 1.44 1.44
1999P 1.34 1.54 1.37
TOTAL UNIT COVERAGE
1998E (a) 0.55x 0.72x 0.72x
1998N (b) 0.80 1.10 1.10
1999P 0.86 1.19 1.06
LEVERAGED UNIT COVERAGE (c)
1998E (a) 0.94x 0.97x 0.97x
1998N (b) 1.15 1.20 1.20
1999P 1.17 1.25 1.17
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
=============================================================================================================
$2.25 PER SHARE OF PETRO
---------------------------------------------------------------------
$0.005 MARGIN GROWTH $0.00 MARGIN GROWTH
$30.0MM AT 4.75X ACQUISITIONS $30.0MM AT 5.25X ACQUISITIONS
--------------------------------- ----------------------------------
<S> <C> <C>
DCF PER UNIT
1998E (a) $1.620 $1.620
1998N (b) 2.480 2.480
1999P 2.800 2.500
ACCRETION/DILUTION
1998E (a) 32.8% 32.8%
1998N (b) 40.9% 40.9%
1999P 47.4% 31.6%
COMMON UNIT COVERAGE
1998E (a) 0.94x 0.94x
1998N (b) 1.44 1.44
1999P 1.54 1.38
TOTAL UNIT COVERAGE
1998E (a) 0.74x 0.74x
1998N (b) 1.13 1.13
1999P 1.22 1.09
LEVERAGED UNIT COVERAGE (c)
1998E (a) 0.97x 0.97x
1998N (b) 1.20 1.20
1999P 1.25 1.17
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(a) 1998 estimate assumes no acquisitions for either company, and is adjusted
to reflect actual results through 3/31/98.
(b) 1998 budgeted.
(c) Defined as (DCF + Int)/[((GP units + common units)* MQD) + Int)]
Page 24
<PAGE>
PUBLIC COMPANY ANALYSIS
[_]A.G. Edwards compared certain financial and market information of Gas on a
historical and pro forma basis to that of certain public master limited
partnerships which A.G. Edwards deemed relevant for the purposes of this
analysis. A.G. Edwards reviewed the trading multiples from a total of 6
public propane master limited partnerships.
[_]The selected propane master limited partnerships are as follows:
- AmeriGas Partners, L.P. - Heritage Propane Partners,
- Cornerstone Propane Partners, L.P.
L.P. - National Propane Partners,
- Ferrell Gas Partners, L.P. L.P.
- Suburban Propane Partners,
L.P.
[_]No company used in the analysis is identical to Gas.
PUBLIC COMPARABLE COMPANIES (a)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PUBLIC PUBLIC
PRO FORMA COMPANY COMPANY
GAS GAS MEDIANS RANGES
----------- ----------- ------- --------------
<S> <C> <C> <C> <C>
Yield 10.3% 10.8% 9.5% 8.7% to 10.7%
Firm value/LTM EBITDA 12.2x(b) 10.7x(b) 12.3x 9.1x to 18.5x
Firm value/1998 normalized
EBITDA 8.8x(c) 8.0x(c) 11.0x 10.2x to 13.7x
Equity Market Cap/LTM DCF 17.6x(d) 14.0x(d) 16.0x 8.6x to 24.8x
Equity Market Cap/1998
normalized DCF 10.4x(e) 7.8x(e) 13.6x 11.6x to 16.6x
LTM common unit coverage 0.9x(f) 0.9x(f) 1.4x 0.6x to 1.5x
1998E common unit coverage 1.3x(g) 1.6x(g) 1.4x 0.9x to 1.8x
LTM total unit coverage 0.6x(f) 0.7x(f) 0.7x 0.4x to 1.1x
1998E total unit coverage 0.9x(g) 1.2x(g) 0.7x 0.7x to 1.0x
1998E leveraged unit coverage 1.2x(g)(h) 1.3x(g)(h) 1.1x 0.9x to 1.3x
</TABLE>
- --------
(a) Public comparable companies include: APU, CNO, FGP, HPG, CNL and SPH.
(b) Firm value/adjusted 1998 budget EBITDA.
(c) Firm value/1999 estimated EBITDA.
(d) Equity market cap/adjusted 1998 budget EBITDA.
(e) Equity market cap/1999 estimated DCF.
(f) Adjusted 1998 budget.
(g) 1999 estimates.
(h) Defined as (DCF + interest)/(((GP units + common units)*MQD)+interest).
Page 25
<PAGE>
PUBLIC COMPANY ANALYSIS
($ IN MILLIONS, EXCEPT PER UNIT DATA)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CLOSING IMPLIED IMPLIED COMMON
PRICE ON MARKET VALUE FIRM DISTRIBUTION UNITS/
COMPANY TICKER (5/15/98) OF EQUITY VALUE PER UNIT YIELD TOTAL UNITS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gas (a) $21.375 $ 135.8 $ 223.6 $2.20 10.3% 60.3%
AmeriGas Partners, L.P. APU 24.688 1,055.2 1,746.1 2.20 8.9% 52.8%
Cornerstone Propane Partners, L.P. (d) CNO 21.875 442.7 673.7 2.16 9.9% 66.7%
Ferrellgas Partners, L.P. (e) FGP 21.750 694.5 1,220.2 2.00 9.2% 47.0%
Heritage Propane Partners, L.P. HPG 23.000 196.7 370.8 2.00 8.7% 55.8%
National Propane Partners, L.P. NPL 19.688 225.7 365.9 2.10 10.7% 59.6%
Suburban Propane Partners, L.P. (f) SPH 19.063 558.8 925.1 2.00 10.5% 75.1%
- ------------------------------------------------------------------------------------------------------------------------------------
MEAN 9.6% 59.5%
MEDIAN 9.5% 57.7%
- ------------------------------------------------------------------------------------------------------------------------------------
PRO FORMA $21.375 $ 308.3 (G) $ 604.5 (H) $2.30 10.8% 75.5%
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
LTM COMMON LTM TOTAL FY98E FY98E COMMON FY98E TOTAL
COMPANY UNIT COVERAGE UNIT COVERAGE DCF/UNIT UNIT COVERAGE UNIT COVERAGE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gas (a) 0.9x (b) 0.6x (b) $1.90 (c) 1.3x (c) 0.9x (c)
AmeriGas Partners, L.P. 1.5x 0.8x 1.88 1.6x 0.9x
Cornerstone Propane Partners, L.P. (d) 0.8x 0.5x 1.47 1.1x 0.7x
Ferrellgas Partners, L.P. (e) 1.4x 0.7x 1.34 1.4x 0.7x
Heritage Propane Partners, L.P. 1.3x 0.8x 2.00 1.8x 1.0x
National Propane Partners, L.P. 0.6x 0.4x 1.60 1.3x 0.8x
Suburban Propane Partners, L.P. (f) 1.5x 1.1x 1.41 0.9x 0.7x
- ------------------------------------------------------------------------------------------------------------------------------------
MEAN 1.2x 0.7x 1.4x 0.8x
MEDIAN 1.4x 0.7x 1.4x 0.7x
- ------------------------------------------------------------------------------------------------------------------------------------
PRO FORMA 0.9x (B) 0.7x (B) 2.73 (C) 1.6x (C) 1.2x (C)
</TABLE>
_____________________________________________
1998 estimates per A.G. Edwards' research, except for Gas, Oil, and Pro Forma.
Implied Firm Value equals common, subordinated and GP units, multiplied by the
market price of common units plus debt, less cash.
(a) Pro forma for the Pearl Gas acquisition and the common unit offering, Fiscal
1997 maintenance capital expenditure used as LTM figure.
(b) For Gas and Pro forma only, LTM DCF figures are adjusted 1998 budget DCF
estimates.
(c) For Gas and Pro forma only, FY98E DCF figures are 1999 DCF estimates.
(d) Financial information pro forma for common unit offering. Maintenance
capital expenditures assumed to be 8% of EBITDA due of lack of disclosure.
(e) Maintenance capital expenditures assumed to be 8% of EBITDA due to lack of
disclosure.
(f) Financial figures exclude $5.1 million gain from sale of minority interest.
(g) 14,425 units x $21.375.
(h) $308.3 in equity plus $318.989 pro forma debt, less $13.506 cash and $9.350
in cash collateral.
Page 26
<PAGE>
PUBLIC COMPANY ANALYSIS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
LTM 1998E LONG TERM LTM FIRM VALUE/ FIRM VALUE/
LEVERAGED LEVERAGED DEBT/ EBITDA/ LTM 1998E
UNIT COVERAGE(A) UNIT COVERAGE(A) FIRM VALUE INT. EXP. EBITDA EBITDA
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GAS 0.9x (b) 1.2x (c) 42.9% 2.3x (d) 12.2x (d) 8.8x (e)
AmeriGas Partners, L.P. 1.2x 1.3x 39.8% 2.2x 11.8x 11.3x
Cornerstone Propane Partners, L.P. 0.9x 1.0x 34.6% 2.4x 14.7x 13.7x
Ferrellgas Partners, L.P. 1.2x 1.1x 40.6% 2.1x 12.8x 12.3x
Heritage Propane Partners, L.P. 1.1x 1.3x 46.2% 2.6x 10.9x 10.5x
National Propane Partners, L.P. 0.8x 1.1x 37.6% 2.7x 18.5x 10.7x
Suburban Propane Partners, L.P. 1.3x 0.9x 46.3% 3.1x 9.1x 10.2x
-------------------------------------------------------------------------------------------------------------------------------
MEAN 1.1x 1.1x 40.8% 2.5x 13.0x 11.5x
MEDIAN 1.1x 1.1x 40.2% 2.5x 12.3x 11.0x
-------------------------------------------------------------------------------------------------------------------------------
PRO FORMA 1.0x (b) 1.3x (c) 52.8% 2.0x (d) 10.7x (d) 8.0x (e)
<CAPTION>
------------------------------------------------------------------
Equity Equity
Market Cap/ Market Cap/
LTM DCF 1998E DCF
-----------------------------
<S> <C> <C>
GAS 17.6x (f) 10.4x (g)
AmeriGas Partners, L.P. 14.8x 13.4x
Cornerstone Propane Partners, L.P. 19.5x 16.4x
Ferrellgas Partners, L.P. 16.4x 16.6x
Heritage Propane Partners, L.P. 15.6x 11.6x
National Propane Partners, L.P. 24.8x 12.6x
Suburban Propane Partners, L.P. 8.6x 13.8x
------------------------------------------------------------------
MEAN 16.6x 14.1x
MEDIAN 16.0x 13.6x
------------------------------------------------------------------
PRO FORMA 14.0x (f) 7.8x (g)
</TABLE>
_______________________________
EBITDA is defined as net income (loss) before extraordinary items plus
interest, income taxes, depreciation and amortization, impairment
expense, and other non-recurring and non-operating items.
(a) Defined as (DCF + interest)/(((GP units + common units)*MQD)+interest).
(b) For Gas and Pro forma only, LTM leveraged unit coverage figures use
adjusted 1998 budget estimates.
(c) For Gas and Pro forma only, 1998E leveraged unit coverage figures use
1999 estimates.
(d) For Gas and Pro forma only, LTM EBITDA figures are adjusted 1998
budget estimates.
(e) For Gas and Pro forma only, 1998E EBITDA figures are 1999 estimates.
(f) For Gas and Pro forma only, LTM DCF figures are adjusted 1998 budget
DCF estimates.
(g) For Gas and Pro forma only, 1998E DCF figures are 1999 DCF estimates.
Page 27
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
GAS - STAND ALONE
($ in thousands)
<TABLE>
<CAPTION>
===========================================================================================================================
INCOME STATEMENT SUMMARY (a): 1998 1999 2000 2001 2002 TERMINAL
- ---------------------------- ------ ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
EBITDA 18,279 25,299 26,728 28,157 29,586
% increase 38.4% 5.6% 5.3% 5.1%
Net income (1,321) 2,489 2,396 2,601 2,818
CASH FLOW SUMMARY:
- ------------------
After-tax EBI 11,494 12,011 12,696 13,380
Depreciations and amortization 13,780 14,693 15,435 16,182
Maintenance capital expenditures (3,185) (3,242) (3,301) (3,360)
Working capital increases (500) (500) (500) (500)
------- ------- ------- -------
Net operating cash flow (free cash flow) 21,589 22,962 24,330 25,702
----------
WEIGHTED AVERAGE COST OF CAPITAL (b) 7.8%
----------
----------
TERMINAL EBITDA MULTIPLE (c) 10.3x
----------
Discount factor (d) 0.9630 0.8930 0.8281 0.7679 0.7395
Terminal value (e) $304,736
----------
PRESENT VALUE $ 306,529 $20,790 $20,505 $20,148 $19,737 $225,350
---------- ------- ------- ------- ------- --------
Current net debt (f) $(113,629)
----------
NET PRESENT VALUE OF EQUITY $ 192,900
==========
Common units/Total units (g) 60.3%
----------
EQUITY VALUE TO COMMON UNITS (h) $ 116,310
----------
</TABLE>
______________________________________________________________
(a) Based on management projections.
(b) Based on comparable companies' WACC.
(C) Gas' current firm value of $223.6 million/$21.730 million
normalized 1998 EBITDA = 10.3x, which represents a multiple of
current year normalized EBITDA.
(d) Discount factor calculated using half-year convention.
(e) Terminal value calculated using EBITDA multiple.
(f) Represents total projected debt less cash as of 9/30/98
(g) Total units include common, subordinated and GP units.
(h) Current market value of common units is 3,832 units *$21.375 unit price
= $81,909
Page 28
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
GAS - PRO FORMA PAINEWEBBER MODEL (a)
($ in thousands)
<TABLE>
<CAPTION>
====================================================================================================================================
INCOME STATEMENT SUMMARY (b): 1998 1999 2000 2001 2002 Terminal
- ----------------------------- ------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
EBITDA 56,234 75,405 80,900 86,317 91,668
% increase 34.1% 7.3% 6.7% 6.2%
Net income (13,029) 210 (2,387) (5,180) (8,137)
CASH FLOW SUMMARY:
- -----------------
After-tax EBI 28,886 28,639 28,306 27,897
Depreciation and amortization 45,995 51,736 57,486 63,245
Maintenance capital expenditures (6,826) (6,956) (7,089) (7,224)
Working capital increases (c) (1,000) (1,000) (1,000) (1,000)
-------- ------- ------- -------
Net operating cash flow (free cash flow) 67,055 72,419 77,703 82,918
----------
WEIGHTED AVERAGE COST OF CAPITAL (d) 7.8%
----------
----------
TERMINAL EBITDA MULTIPLE (e) 10.3x
----------
Discount factor (f) 0.9632 0.8936 0.8290 0.7690 0.7407
Terminal value (g) $944,180
----------
PRESENT VALUE $956,846 $64,586 $64,710 $64,413 $63,767 $699,370
----------- ---------- ---------- ---------- ---------- ----------
Less net debt (h) ($296,133)
----------
NET PRESENT VALUE OF EQUITY $660,713
==========
Original common units/Total units (i) 26.6%
----------
EQUITY VALUE TO COMMON UNITS (J) $175,506
----------
</TABLE>
_____________________________________________________
(a) Scenario assumes 4.1% steady attrition, $0.005 margin improvement, and
$30 million in acquisitions at 4.75 multiple.
(b) Based on management projections.
(c) A.G. Edwards' assumption.
(d) Based on comparable companies' WACC.
(e) Gas' current firm value of $223.6 million/$21.730 million normalized 1998
EBITDA=10.3x, which represents a multiple of current year normalized EBITDA.
(f) Discount factor calculated using half-year convention.
(g) Terminal value calculated using EBITDA multiple.
(h) Represents total proforma projected debt less cash and cash collateral as
of 9/30/98.
(i) Total units include common, newly issued common, senior subordinated,
subordinated and GP units.
(j) Current market value of common units is 3,832 units *$21.375 unit price =
$81,909
Page 29
<PAGE>
CAPITAL STRUCTURE ANALYSIS
GAS - PRO FORMA AS OF 9/30/98
($ in thousands)
<TABLE>
<CAPTION>
======================================================================================================
Pro forma
Gas Oil Adjustments Gas
---------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Debt:
8.04% First Mortgage Notes $ 85,000 - - $ 85,000
7.25% WC Revolver 7,457 - - 7,457
7.25% Acquisition Facility 10,673 - - 10,673
7.17% First Mortgage Notes 11,000 - - 11,000
11.96% Senior Notes - $ 60,000 ($60,000) -
14.10% Senior Notes - 3,100 (3,100) -
14.10% Subordinated Notes - 3,100 (3,100) -
10.13% Sub Notes & Sr Notes - 50,000 (50,000) -
9.38% Sub Notes & Sr Notes - 75,000 (75,000) -
12.25% Sub Notes & Sr Notes - 81,250 (81,250) -
8.00% Existing Acq Notes Payable - 13,859 - 13,859
8.46% Exchange Debt - - 66,000 66,000
8.50% New Debt - - 125,000 125,000
---------- ---------- ------------- -----------
TOTAL DEBT: $114,130 $286,309 ($81,450) $318,989
WEIGHTED AVERAGE COST OF DEBT 8.2%
PREFERRED STOCK:
14.33% Preferred Stock $ 0 $ 4,167 ($4,167) $ 0
12.88% Preferred Stock - 30,000 (30,000) -
---------- ---------- ------------- -----------
- $ 34,167 ($34,167) -
COMMON EQUITY $ 67,041 ($210,015) $115,204 ($27,770)
------------------------------------------------------------------------------------------------------
</TABLE>
Page 30
<PAGE>
SPECIAL COMMITTEE DRAFT 5/26/98
STAR GAS PARTNERS, L.P.
REVISED PROPOSAL
After careful consideration of the Proposed Transaction and the views
expressed by Petro and PaineWebber, the Special Committee and its advisors
recommend that further refinement and evaluation of the Proposed Transaction is
appropriate.
Subject to further diligence and assuming no material adverse changes in
Star or Petro, or in market conditions, the Special Committee proposes that the
transaction contain the following safeguards for the benefits of Star's common
unitholders;
(A) Star Partnership Agreement. Appropriate steps should be initiated
--------------------------
to amend the Star Partnership Agreement as of the closing date
(assumed to be September 30, 1998) in order to include as a minimum:
(A-1) authorizing the creation of new classes of senior subordinated
units and deferred partnership units, which shall be junior to
all present and future common units;
(A-2) prohibiting the payment of any distributions to senior
subordinated unitholders and to subordinated unitholders except
from net distributable cash flow available from the preceding
twelve months after first paying $2.30 per unit to the common
unitholders for such period plus any cumulative common unit
arrearages from prior period(s); and
(A-3) providing a surplus available for common unit distributions
equal to $1.10 per new common unit, as part of the Refinancing
Transaction (described below).
(B) Definitive Transaction Agreement. A draft of the definitive
--------------------------------
transaction agreement should be prepared by Petro for the Special
Committee's careful consideration (and for future submission to the
Board of Directors and common unitholders of Star and to the Board of
Directors and shareholders of Petro for approval) setting forth at
least the following steps:
(B-1) At closing of the Transaction, Star shall be obligated to
deliver to Petro's common shareholders the following:
(a) 2,718,000 new senior subordinated units of Star;
(b) 524,000 subordinated units of Star; the balance must be
delivered to Star free and clear for retirement;
<PAGE>
(c) 289,000 GP units of Star; and
(d) 909,000 new deferred partnership units of Star, convertible
into senior subordinated units at 33 1/3% per annum for each
year in which Petro's after-tax income contributes accretion
to every Star unit in excess of $0.50.
(B-2) The Closing shall be contingent upon the successful completion of
the following (collectively, the "Refinancing Transaction"):
(a) The issuance of no more than 6,588,000 new common units at a
price per unit of at least $21 with a gross spread of no
greater than 5.0%, and
(b) The issuance of $125,000,000 of a new debt with an interest
rate no higher than 8.5% with a gross spread of no greater
than 3.0%.
The use of proceeds of the Refinancing Transaction shall be
solely to refinance certain of the outstanding indebtedness
assumed from Petro.
(B-3) Prior to the closing of the Transaction, Petro shall represent,
warrant and agree that:
(a) Prior to the Refinancing Transaction, Petro shall have a
balance of debt and preferred stock (at redemption value),
less any cash balance in excess of such amounts required in
(B-3) (b) below, of no more than $331,367,000.
(b) Petro shall have a minimum cash balance of $500,000, a
positive working capital balance, and a total stockholders'
deficit on its balance sheet of no greater than
$210,000,000, all as of the Closing (assumed to be September
30, 1998).
(c) Petro shall set up appropriate reserves and fund all of the
following transactions costs: the gross spread on the
issuance of the new debt referred to in (B-2) (b); financial
advisory fees and fairness opinions for Petro and Star;
legal, accounting and printing fees for Petro and Star; all
exchange and solicitation fees related to the retirement or
redemption of Petro's debt and preferred stock; all
appraisals and environmental reports; all rating agencies
and bank fees; and all other out-of-pocket costs and
expenses associated with the Transaction.
(B-4) Prior to the Closing of the Transaction, Petro shall not declare
or distribute any cash dividends to its common shareholders.
<PAGE>
SPECIAL COMMITTEE DRAFT 7/28/98
STAR GAS PARTNERS, L.P.
REVISED PROPOSAL
Subject to further due diligence, and assuming no material adverse changes
in Star, Petro or market conditions, the Special Committee of Star proposes that
an acquisition of Petro by Star contain the following:
(A) Star Partnership Agreement. Appropriate steps should be initiated to
--------------------------
amend the Star Partnership Agreements as of the closing date in order
to include, as a minimum:
(A-1) authorizing the creation of a new class of senior subordinated
units, which shall be junior to all present and future common
units;
(A-2) subordinating the GP units in terms of their distribution
rights to equal those of the subordinated units, which in turn
shall be junior to all present and future common and senior
subordinated units;
(A-3) increasing the MQD and actual distribution to $2.30 per unit on
an annualized basis;
(A-4) prohibiting the payment of any distributions to senior
subordinated, subordinated and GP units from anything but
Adjusted Operating Surplus (i.e. what is "earned") over the
latest twelve months after first paying the MQD per unit to the
common unitholders for such period plus any cumulative common
units arrearages from prior period(s); and
(A-5) an increase in the Operating Surplus basket equal to:
$6.0 million New common units
------------
Common units issued in the
Outstanding as of Refinancing
7/27/98 x Transaction
(B) Definitive Transaction Agreement. A draft of the definitive
--------------------------------
transaction agreement should be prepared by Petro for the Special
Committee's careful consideration (and for future submission to the
Board of Directors and common unitholders of Star and to the Board of
Directors and shareholders of Petro for approval) setting forth at
least the following steps:
<PAGE>
(B-1) At closing of the transaction, Star shall be obligated to deliver
to Petro's common shareholders the following:
(a) 2,809,000 new senior subordinated units of Star;
(b) 537,000 subordinated units of Star; the balance must be
delivered to Star free and clear for retirement;
(c) GP units of Star equaling no greater than 2% of the total
units outstanding at closing, and
(d) special distribution rights limited to an aggregate of
909,000 senior subordinated units. A special distribution of
303,000 senior subordinated units will be granted to the
senior subordinated, subordinated and GP unitholders each
time Petro Accretion (to be subsequently defined) exceeds
$0.50 per unit for the latest twelve months. The first test
will be twelve months after the closing, and such tests will
not be more often than once every twelve months. If the
tests are not met within four years after the closing, then
the right to earn the special distribution will lapse.
(B-2) The closing shall be contingent upon the successful completion of
the following (collectively, the "Refinancing Transaction"):
(a) the issuance of no more than an aggregate of $140 million of
new common and/or subordinated units, excluding any
overallotment option of no greater than 15% associated with
a common unit offering, with a gross spread of no greater
than 5.0%; and
(b) the issuance of no more than $120 million of new debt with a
gross spread of no greater than 3.0%.
The use of proceeds of the Refinancing Transaction shall be
solely to refinance certain of the outstanding indebtedness
assumed from Petro.
Further, the cost of capital from the equity and debt raised in
the Refinancing Transaction may not exceed $27.5 million on an
annual basis. "The cost of capital from the equity and debt
raised in the Refinancing Transaction on an annual basis" shall
be calculated as follows: (A) the number of new units issued in
(B-2)(a) multiplied by $2.30 per unit, plus (B) the amount of new
debt issued in (B-2)(b) multiplied by the offering yield of such
new debt.
(B-3) Prior to the closing of the transaction, Petro shall represent,
warrant and agree that:
<PAGE>
(a) Prior to the Refinancing Transaction, the sum of the pro forma
principal amount of Petro debt which is restructured plus the
redemption/repurchase price of all debt and preferred stock
redeemed in the transaction (including the value of Petro stock
issued in connection with the redemption option), less any cash
balance in excess of such amounts required in (B-3) (b) below,
shall be no greater than $331,367,000.
(b) Petro shall have a minium cash balance of $500,000, a positive
working capital balance, and a total stockholders' defict on its
balance sheet on closing if no greater than Maximum Stockholders'
Deficit (to be subsequently defined based on updated projections
and anticipated closing dates).
(c) Petro shall set up appropriate reserves and fund all of the
following transactions costs: the gross spread on the issuance of
the new debt referred to in (B-2) (b); financial advisory fees
and fairness opinions for Petro and Star; legal, accounting and
printing fees for Petro and Star; all exchange and solicitation
fees related to the retirement or redemption of Petro's debt and
preferred stock; all appraisals and environmental reports; all
rating agencies and bank fees; and all other out-of-pocket costs
and expenses associated with the transaction.
(B-4) Prior to the closing of the transaction, Petro shall not declare
or distribute any cash dividends to it common shareholders.
<PAGE>
FAIRNESS OPINION PRESENTATION TO THE
SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF
STAR GAS CORPORATION
Confidential
A.G.EDWARDS & SONS, INC.
INVESTMENT BANKING
October 16, 1998
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Section
-------
<S> <C>
Introduction..................................................... I
Review of Events to Date......................................... II
Summary of the Transaction....................................... III
Summary Observations and Conclusions............................. IV
Appendices are separately bound:
Appendix I Analyses Performed Under 30-Year Weather Scenario
Appendix II Analyses Performed Under 15-Year Weather Scenario
</TABLE>
<PAGE>
Introduction
TRANSACTION PROPOSAL [_] During 1997, Star Gas Partners Corporation (the
"General Partner") and Petroleum Heat and Power Co.,
Inc. ("Petro") discussed the idea of a possible
acquisition of Petro by Star Gas Partners, L.P.
("Star Gas" or the "Partnership"). The overall
transaction (the "Transaction") consists of the
following four principal parts:
- The acquisition of Petro by the Partnership;
- Public offerings of debt and equity by the
Partnership and the redemption of certain debt
and preferred stock of Petro (the
"Financings");
- The withdrawal of Star Gas Corporation as the
general partner of the Partnership and Star Gas
Propane, L.P. (the "Operating Partnership"),
and the election of Star Gas LLC as the new
general partner; and
- Amending the Agreement of Limited Partnership
of the Partnership and the Operating
Partnership in order to consummate the
Transaction.
A.G.EDWARDS' [_] By letter engagement, dated March 23, 1998, A.G.
ENGAGEMENT Edwards & Sons, Inc. ("A.G. Edwards") was engaged by
the Special Committee (the "Special Committee") of
the Board of Directors of the General Partner (the
"Board") to act as its financial advisor with
respect to the Transaction and to issue to the
Special Committee an opinion as to the fairness,
from a financial point of view, to the public common
unitholders of Star (the "Public Common
Unitholders"), of the Transaction (the "Fairness
Opinion").
[_] The preparation of a fairness opinion is not
susceptible to partial analyses or summary. In
rendering its Fairness Opinion, A.G. Edwards applied
its judgment to a variety of complex analyses and
assumptions. A.G. Edwards may have given various
analyses more or less weight than other analyses,
and may have deemed various assumptions more or less
probable than other assumptions. The assumptions
made and the judgments applied by A.G. Edwards in
rendering its opinion are not readily susceptible to
description beyond that set forth in the written
text of the Fairness Opinion itself.
<PAGE>
INTRODUCTION
(continued)
AS PART OF ITS ENGAGEMENT, [_] A review of the Form S-4 Registration
A.G. EDWARDS' ACTIVITIES Statement and exhibits thereto, including the
INCLUDED, BUT WERE NOT Agreement and Plan of Merger, the Exchange
LIMITED TO, THE FOLLOWING: Agreement, the Amended and Restated Agreement
of Limited Partnership and the Conveyance and
Contribution Agreements.
[_] A review of certain publicly-available
Partnership and Petro historical audited
financial statements and certain unaudited
interim financial statements;
[_] A review of certain financial analyses and
forecasts of the Partnership prepared by and
reviewed with management of the General
Partner and the views of management of the
General Partner regarding the Partnership's
past and current business operations, results
thereof, financial condition and future
prospects, including the impact of the
Transaction, as well as information relating
to the retail propane distribution industry
and the potential strategic, financial and
operational benefits and challenges
anticipated from the Transaction;
[_] A review of certain financial analyses and
forecasts of Petro prepared by and reviewed
with management of Petro and the views of
management of Petro regarding Petro's past
and current business operations, results
thereof, financial condition and future
prospects, including the impact of the
Transaction, as well as information relating
to the retail home heating oil distribution
industry and the potential strategic,
financial and operational benefits and
challenges anticipated from the Transaction;
[_] A review of the pro forma impact of the
Transaction on the Partnership and Petro;
[_] A review of the publicly reported historical
price and trading activity for the
Partnership's Common Units and Petro's Class
A Common Stock, including a comparison of
certain financial and stock market
information for the Partnership with similar
publicly available information for certain
other companies, the securities of which are
publicly traded;
<PAGE>
INTRODUCTION
(continued)
[_] A review of the current market environment
generally, and the retail propane
distribution environment and the retail home
heating oil distribution environment in
particular;
[_] A review of information relating to the
financial terms of certain transactions,
including selected mergers and acquisition
transactions;
[_] Conversations with PaineWebber regarding the
nature and extent of development of the terms
of the Transaction; and
[_] A review of such other information, financial
studies, analyses and investigations, and
financial, economic and market criteria that
A.G. Edwards considered relevant.
NATURE OF INFORMATION [_] In rendering its Fairness Opinion, A.G.
REVIEWED AND PRESENTED Edwards has relied upon and assumed, without
independent verification, the completion of
the Financings and the Transaction in
accordance with the Agreement and Plan of
Merger, and the accuracy and completeness of
all financial and other information, publicly
available, furnished to, or otherwise
discussed with A.G. Edwards for the purposes
of the Fairness Opinion. With respect to
financial projections and other information
provided to or otherwise discussed with A.G.
Edwards, A.G. Edwards assumed and was advised
by the management of the General Partner and
Petro, respectively, that such projections
and other information were reasonably
prepared on a basis that reflects the best
currently available estimates and judgments
of the management of the General Partner and
Petro, respectively. A.G. Edwards did,
however, review numerous sets of projections
for Petro and analyzed what it believed were
certain of the major assumptions embedded
within Petro's projections. A.G. Edwards used
two sets of projections for Petro to perform
its analyses. A.G. Edwards used a set of
projections based on 30-year weather and a
set of projections based on 15-year weather.
The Special Committee did not, however,
engage A.G. Edwards to, and therefore A.G.
Edwards did not, verify the accuracy or
completeness of any such information. A.G.
Edwards has relied upon the assurances of the
management of the General Partner and Petro
that the respective managements are not aware
of any facts that would make such information
inaccurate or misleading.
<PAGE>
INTRODUCTION
(continued)
[ ] In performing its analyses, A.G. Edwards made numerous
assumptions with respect to the retail propane distribution
industry and the retail home heating oil distribution
industry, and general business and economic conditions
which are beyond the control of the Partnership and Petro.
The analyses performed by A.G. Edwards are not necessarily
indicative of actual values or actual future results, which
may be significantly more or less favorable than suggested
by such analyses. Such analyses were prepared solely as
part of A.G. Edwards' analysis of the fairness, from a
financial point of view, to the Public Common Unitholders
of the Transaction.
[ ] This presentation is for the private use of the Special
Committee and may not be distributed to any other parties
without A.G. Edwards' written permission. THE ANALYSES
PRESENTED HEREIN RELATE TO THE FAIRNESS OPINION TO BE
ISSUED BY A.G. EDWARDS, BUT DO NOT COMPRISE THE FAIRNESS
OPINION.
[ ] A.G. Edwards' Fairness Opinion, in any event, is limited to
the fairness, from a financial point of view, to the Public
Common Unitholders of the Transaction. The Fairness Opinion
does not constitute a recommendation to any Public Common
Unitholders as to how to vote with respect to the
Transaction. The Fairness Opinion does not represent tax or
legal advice. The summary description of the analysis
described herein, is qualified in its entirety by reference
to the full text of the Fairness Opinion.
[ ] The Fairness Opinion is necessarily based upon financial
and other conditions and circumstances existing and
disclosed to it as of October 16, 1998. A.G. Edwards has
been requested to update its Fairness Opinion to a date
prior to the mailing of the Form S-4 Registration
Statements by Petro and the Partnership. No assurance can
be given that future market conditions will permit A.G.
Edwards to deliver an updated Fairness Opinion.
ASSUMPTIONS [ ] In rendering it Fairness Opinion, A.G. Edwards has assumed
that the Transaction will be consummated on the terms
contained in the Form S-4 Registration Statement and
exhibits thereto, including the Agreement and Plan of
Merger, the Exchange Agreement, the Amended and Restated
Agreement of Limited Partnership and the Conveyance and
Contribution Agreements, without any waiver of any material
terms or conditions by the Partnership or Petro. The
assumption that the Financings are consummated in
accordance with the closing conditions of the Agreement and
Plan of Merger is a material assumption.
Page 4
<PAGE>
Review of Events to Date
FEBRUARY 11 [ ] A.G. Edwards presented its qualifications to the Special
Committee and its legal counsel, Baker & Botts.
MARCH 23 [ ] Special Committee engaged A.G. Edwards.
MARCH 23 [ ] A.G. Edwards met with members of the Partnership's
management and Petro's management and submitted a
preliminary data request list.
[ ] A.G. Edwards began due diligence review with management
and other representatives of the Partnership and of
Petro.
MARCH 30 [ ] A.G. Edwards received data related to its preliminary
data request list.
APRIL 28 [ ] Special Committee and A.G. Edwards met to discuss the
Transaction.
MAY 4 [ ] A.G. Edwards submitted a preliminary status report (the
"Preliminary Status Report") to the Special Committee.
MAY 7 [ ] Special Committee and A.G. Edwards met with Petro's
management and PaineWebber to discuss the Transaction
and the Preliminary Status Report.
MAY 8 [ ] A.G. Edwards continued onsite diligence at Petro.
MAY 19 [ ] A.G. Edwards met with PaineWebber and Petro's management
to discuss the Transaction.
MAY 20 [ ] Special Committee, Baker & Botts and A.G. Edwards met
telephonically to discuss the Transaction.
MAY 26 [ ] A.G. Edwards, submitted a revised proposal (the
"Preliminary Draft Proposal") to the Special Committee,
which was subsequently forwarded to Petro at the
Committee's request.
Page 5
<PAGE>
REVIEW OF EVENTS TO DATE
(continued)
JULY 28 [ ] A.G. Edwards submitted another revised proposal
(the "Revised Proposal") on the behalf of the
Special Committee to the Board, the Petro Board
and PaineWebber.
AUGUST 11 [ ] The Special Committee approved the Revised
Proposal.
AUGUST 13 [ ] The Petro Board approved the Revised Proposal.
AUGUST 14 [ ] The Partnership and Petro announced the agreement
in principle.
AUGUST AND SEPTEMBER [ ] The Special Committee, with assistance from Baker
& Botts and A.G. Edwards, negotiated the terms of
a definitive Agreement and Plan of Merger and
Exchange Agreement with Petro, Andrews & Kurth and
PaineWebber.
OCTOBER 16 [ ] Special Committee meeting to review documents and
consider and act upon the legal agreements
necessary to implement the Transaction.
- The Committee had the opportunity to review,
with Baker & Botts and A.G. Edwards, the
following:
[ ] Draft dated October 13, 1998 of the Form
S-4 Registration Statement
[ ] Draft dated October 8, 1998 of the
Agreement and Plan of Merger
[ ] Draft dated October 6, 1998 of the
Amended and Restated Agreement of Limited
Partnership
[ ] Draft dated October 7, 1998 of the
Exchange Agreement
[ ] Draft dated October 9, 1998 of the
Conveyance and Contribution Agreements
Page 6
<PAGE>
SUMMARY OF THE TRANSACTION
PRO FORMA STAR GAS UNITS OUTSTANDING
(in thousands)
[ ] There are currently 6,383 Star Gas units outstanding comprised of 3,859
common units, 2,396 subordinated units and 128 implied general partner
("GP") units. The subordinated units and GP units are currently assets
of Petro.
[ ] There are currently 26,574 shares of Petro common stock outstanding
held by public shareholders and "affiliates." The public holds 14,327
Class A shares, 11 Class B shares and 282 Class C shares. The
"affiliates" hold 11,953 shares which include 9,638 Class A shares and
2,315 Class C shares.
[ ] Each shareholder of Petro will receive a certain number of units in
Star Gas such that the implied consideration paid for each Petro share
averages $2.43 based on A.G. Edwards' estimates of the value of the
units being offered to Petro as consideration.
[ ] All of the publicly held 14,327 Class A shares and 282 Class C shares,
and a portion of the "affiliate" held Class A shares (5,243) and Class
C shares (1,328) will receive .13064 units of newly created senior
subordinated units for each share (1,908 units to the public and 859
units to the "affiliates", 2,767 units in total) with an attached
Contingent Unit ("CU"). See the following page for a discussion of the
Contingent Units. A.G. Edwards estimates an implied value for these
units of $18.52/unit. The remaining "affiliates" of Petro not receiving
senior subordinated units, who hold a total of 5,382 shares, will
receive .15920 units for a total of 857 junior subordinated and GP
units, both of which will also include attached CUs. A.G. Edwards
estimates an implied value for these units of $15.41/unit.
[ ] The 2,396 subordinated units and 128 GP units currently owned by Petro
will effectively be retired in the Transaction.
Page 7
<PAGE>
SUMMARY OF THE TRANSACTION
PRO FORMA STAR GAS UNITS OUTSTANDING
(in thousands)
(continued)
DESCRIPTION OF CONTINGENT UNITS
[ ] During the five year period, beginning with the first full four
quarters following the Merger, the senior subordinated units, junior
subordinated units and general partner interests will have the right to
receive up to 909,000 senior subordinated units upon Petro meeting a
"Contingent Unit Test." Each time the Contingent Unit Test is met, (but
not more frequently than once every four quarter period), the senior
subordinated units, junior subordinated units and general partner
interests will receive an aggregate of 303,000 senior subordinated
units, subject to a maximum of 909,000 senior subordinated units. The
Contingent Unit Test will be met during any four quarter period when
distributable cash flow per unit attributable to Petro exceeds $2.90
which is 32% higher than the current annualized MQD of $2.20 and 26%
higher than the proposed MQD of $2.30.
Page 8
<PAGE>
SUMMARY OF THE TRANSACTION
ALLOCATION OF CURRENT PETRO SHARES OUTSTANDING
(IN THOUSANDS)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Class A Class B Total
------- ------- --------
<S> <C> <C> <C>
Groups Receiving Senior Sub
---------------------------
Public 14,327 282 14,609
Affiliates 5,243 1,328 6,572
------- ------- -------
Total Receiving Senior Sub 19,570 1,610 21,181
Groups Receiving Junior Sub and GP
----------------------------------
Affiliates 4,395 987 5,382
------- ------- -------
Sub Total 23,965 2,598 26,562
======= =======
Class B 11
-------
Total Shares including Class B 26,574
=======
</TABLE>
Page 9
<PAGE>
SUMMARY OF THE TRANSACTION
PRO FORMA STAR GAS UNITS OUTSTANDING
PRE-FINANCING ASSUMPTIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
Issued to Petro
-------------------
Type of Units Current Public Affiliates Retired Pro Forma
------------- ------- ------ ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
Common 3,859 - - - 3,859
Senior Subordinated - 1,908 859 - 2,767
Subordinated 2,396 - - (2,396) -
Junior Subordinated
& New General Partner - - 857 - 857
Old General Partner 128 - - (128) -
------ ---------
6,383 7,482
</TABLE>
Page 10
<PAGE>
SUMMARY OF THE TRANSACTION
EQUITY PURCHASE PRICE CALCULATION
Implied Equity Value of Petro's Assets
(units in thousands, $ in thousands, except per unit amounts)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value of Securities
Event Issued to and Retired from Petro
- --------------------------------------------------------------------------------
<S> <C>
Issuance of Senior Subordinated
Units to Public Petro Shareholders 1,908 x $18.52
---------------------
$35,337
Issuance of Senior Subordinated
Units to Affiliate Petro Shareholders 859 x $18.52
---------------------
$15,900
Issuance of Junior Subordinated
& General Partner Units to Affiliate Petro Shareholders 857 x $15.41
---------------------
$13,203
------------
PURCHASE PRICE OF PETRO'S EQUITY $64,439
- -------------------------------------------------------------------------------------
Divided by 26,562 shares of Petro's Common stock = $2.43 per share
(Excludes 11 Class B Shares)
- -------------------------------------------------------------------------------------
Retire Subordinated Units held by Petro (2,396) x $15.41
---------------------
($36,924)
Retire Old General Partner Units held by Petro (128) x $15.41
---------------------
($1,967)
------------
EQUITY VALUE OF PETRO'S HEATING OIL ASSETS $25,549
</TABLE>
Page 11
<PAGE>
SUMMARY OBSERVATIONS AND CONCLUSIONS
POTENTIAL STRUCTURAL AND [_] Advantages to Public Common Unitholders
QUALITATIVE ADVANTAGES - Increase in cash available for distribution
AND DISADVANTAGES TO - Increase in the MQD to $2.30
THE PUBLIC COMMON - Priority in payment of MQD and arrearages
UNITHOLDERS. over Senior Subordinated, Junior
Subordinated and G.P. unitholders during
subordination period
- Distributions on Senior Subordinated, Junior
Subordinated and General Partner units
limited to amount of distributable cash
generated during subordination period
- Distributions on Senior Subordinated, Junior
Subordinated and General Partner Units and
conversion of Special Incentive Rights based
on actual results versus adjusted for normal
weather
- Earliest date on which the subordination
period would end extended to July 2002
- Acquisition growth opportunities in retail
home heating oil distribution industry at
historically lower multiples than retail
propane distribution industry
- Increase in market capitalization with
potential for more liquidity
- Diversifies geographic customer base
[_] Disadvantages to Public Common Unitholders
- Petro is several times the Partnership's
size, thus changing the nature of the
Partnership's business
- Petro's history of operational and financial
difficulties
- Increases seasonality and weather risk
- Taxable income will increase at a greater
rate
- No assurance that Petro can continue
improvements (reduce attrition and improve
profit margins) while making attractive
acquisitions
- Potential dilution in the event that the
Partnership pro forma for the Transaction
fails to meet its projections
Page 12
<PAGE>
SUMMARY OF OBSERVATIONS AND CONCLUSIONS
(continued)
IMPLIED UNIT [_] A.G. Edwards calculated a range of values for the Senior
VALUE ANALYSIS Subordinated, Junior Subordinated and General Partner
units, based on a required rate of return, trading yield,
and discount to the common units. (See Appendix D -
"Implied Unit Value Analysis")
----------------------------------------------------------
Estimated Unit Prices Summary
<TABLE>
<CAPTION>
Senior Subordinated Units
--------------------------------------------------------------------------------
<S> <C> <C>
Range
----------------------
Required rate of return (a) 20.0% - 30.0% $17.90 - 22.28
Trading yield (b) 11.5% - 13.5% $17.04 - 20.00
Discount to common units (c) 10.0% - 20.0% $16.21 - 18.23
Range $16.21 - 22.28
Adjusted Range (d) $17.04 - 20.00
----------------------
Assumed value (e) $18.52
----------------------
<CAPTION>
Junior Subordinated and GP Units
--------------------------------------------------------------------------------
<S> <C> <C>
Range
----------------------
Required rate of return (a) 35.0% - 45.0% $14.52 - 16.84
Trading yield (b) 14.0% - 16.0% $14.38 - 16.43
Discount to common units (c) 25.0% - 35.0% $13.17 - 15.19
Range $13.17 - 16.84
Adjusted Range (d) $14.38 - 16.43
----------------------
Assumed value (f) $15.41
----------------------
</TABLE>
(a) Represents required rate of return during subordination period, which is
assumed for the minimum three years. Thereafter, the rate of return is
assumed to equal that of the common units, for a blended required rate of
return of 12.4% to 15.3% for the Senior sub and 16.25% to 18.7% for the
Junior sub and GP units.
(b) Based on a $2.30 annualized MQD.
(c) Based on a discount to the common unit's average closing price for the last
20 trading days ended 10/14/98 of $20.26.
(d) Represents the middle value of both the range of highs and lows.
(e) Implied required rate of return, trading yield and discount to common at a
unit price of $18.52 are 28.1% during subordination (14.7% blended), 12.4%,
and 8.6%, respectively.
(f) Implied required rate of return, trading yield and discount to common at a
unit price of $15.41 are 39.4% during subordination (17.6% blended), 14.9%,
and 23.9%, respectively.
Page 13
<PAGE>
SUMMARY OBSERVATIONS AND CONCLUSIONS
(continued)
PRO FORMA MERGER [_] A.G. Edwards analyzed the impact of the Transaction
ANALYSIS on the Partnership's distributable cash flow per
unit, the related accretion, common unit coverage and
total unit coverage on a pro forma basis. (See
Appendix E -"Pro Forma Merger Analysis")
-----------------------------------------------------
<TABLE>
<CAPTION>
15-Year Weather 30-Year Weather
--------------------------- ---------------------------
Star Gas Star Gas
Stand-alone Pro Forma Stand-alone Pro Forma
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
DCF per unit
1998 Adjusted for Actual $ 1.27 $ 1.53 $ 1.27 $ 1.53
1998 Normalized (a) 1.62 2.15 1.84 2.40
1999 Projected 1.77 2.31 2.02 2.60
Accretion / Dilution
1998 Adjusted for Actual $ 0.26 $ 0.26
1998 Normalized (a) 0.53 0.56
1999 Projected 0.54 0.58
Common unit coverage
1998 Adjusted for Actual 0.96x 0.89x 0.96x 0.89x
1998 Normalized (a) 1.22 1.25 1.38 1.39
1999 Projected 1.30 1.33 1.51 1.51
Total unit coverage
1998 Adjusted for Actual 0.58x 0.66x 0.58x 0.66x
1998 Normalized (a) 0.74 0.94 0.84 1.05
1999 Projected 0.81 1.00 0.92 1.13
</TABLE>
_____________________________________________________
(a) Adjusted to represent normal weather.
Page 14
<PAGE>
SUMMARY OF OBSERVATIONS AND CONCLUSIONS
(continued)
MERGER PREMIUMS TO [_] A.G. Edwards analyzed the premium of the
MARKET VALUE ANALYSIS consideration to be received by Petro Common
Stockholders and compared the premium to
Petro's current and historical prices. These
premiums were compared to premiums paid in
acquisitions of majority or remaining
interests announced and completed between
January 1, 1996 and October 7, 1998 where the
target's share price one week prior to the
announcement date was either (i) equal to or
less than $5, (ii) greater than $5 and less
than $10, or (iii) equal to or greater than
$10. (See Appendix F - "Merger Premiums to
Market Value Analysis")
[_] Premiums were calculated one day, one week,
four weeks, three months and one year prior
to the announcement of the agreement in
principle for each merger.
<TABLE>
<CAPTION>
===================================================================================================
COMPARISON OF PREMIUMS PAID
===================================================================================================
Petro at Mean of Transactions Mean of Transactions
Premium to stock price prior $2.43 per Unit Equal to or Greater Than $5
to announcement on August 14th: Offer Price Less Than $5 and Less Than $10
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
One Day prior: 29.6% 39.7% 34.3%
One week prior: 38.9% 48.8% 42.3%
Four weeks prior: 17.8% 55.4% 48.5%
Three months prior: 52.5% 67.1% 58.0%
One year prior: -19.0% 53.8% 45.8%
-------------------------------------------------------------------------------
Maximum 52.5% 67.1% 58.0%
Minimum -19.0% 39.7% 34.3%
===============================================================================
<CAPTION>
--------------------------------------------------------------
COMPARISON OF PREMIUMS PAID
--------------------------------------------------------------
Mean of Transactions
Premium to stock price prior Equal to or
to announcement on August 14th: Greater Than $10
--------------------------------------------------------------
<S> <C>
One Day prior: 28.1%
One week prior: 32.7%
Four weeks prior: 39.6%
Three months prior: 77.9%
One year prior: 53.2%
------------------------------------------
Maximum 77.9%
Minimum 28.1%
==========================================
</TABLE>
[_] A.G. Edwards observed that the means of
transactions equal to or less than $5 were
higher than the Petro premiums and higher
than a majority of the means of other
transactions.
[_] The premium to Petro's current stock price
($1.031 as October 14, 1998) was 135.6%.
Page 15
<PAGE>
SUMMARY OF OBSERVATIONS AND CONCLUSIONS
(continued)
RELATIVE CONTRIBUTION [_] A.G. Edwards analyzed the relative pro forma
ANALYSIS contribution of both Star Gas and Petro to
the ownership of capital in the pro forma
entity based on Star Gas' and Petro's
historical results from operations and their
respective projections. (See Appendix G -
"Relative Contribution Analysis")
[_] During 1996 -1997, Star Gas would have
contributed approximately 26.7% and 35.4% to
the combined entity's gross profit and
EBITDA, respectively.
[_] On a pro forma basis during 1998-1999, using
30-year weather, Star Gas is projected to
contribute approximately 28.8% and 32.8% to
the combined entity's gross profit and
EBITDA, respectively (or 29.0% and 32.4%,
respectively, assuming 15-year weather).
[_] For its gross profit and EBITDA
contributions, Star Gas is expected to
receive approximately 37.1% of the pro forma
implied firm value.
IMPLIED FIRM VALUE
[GRAPH APPEARS HERE]
----------------------------
[_] Petro [_] Star Gas
----------------------------
Page 16
<PAGE>
SUMMARY OF OBSERVATIONS AND CONCLUSIONS
(continued)
DISCOUNTED CASH FLOW [_] A.G. Edwards performed discounted cash flow
ANALYSIS analyses for Petro, Star Gas and Star Gas
Pro Forma using projected tax-adjusted
operating cash flows for 1999 through 2002,
terminal values calculated on 2002 EBITDA,
and discount rates based on the related
weighted average cost of capital. (See
Appendix H -"Discounted Cash Flow Analysis")
<TABLE>
<CAPTION>
=================================================================
PETRO STAND ALONE
-----------------------------------------------------------------
15 YEAR TERMINAL VALUE EBITDA MULTIPLE
-------------------------------------------------
6.0x 6.5x 7.0x 7.5x 8.0x
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
13.4% $49,406 $65,422 $81,439 $97,455 $113,472
WACC 13.6% 47,103 62,984 78,865 94,746 110,628
13.9% 44,822 60,570 76,317 92,064 107,812
-----------------------------------------------------------------
<CAPTION>
-----------------------------------------------------------------
30 YEAR TERMINAL VALUE EBITDA MULTIPLE
-------------------------------------------------------
6.0x 6.5x 7.0x 7.5x 8.0x
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
13.4% $64,921 $81,662 $98,403 $115,143 $131,884
WACC 13.6% 62,511 79,110 95,709 112,308 128,908
13.9% 60,124 76,583 93,042 109,502 125,961
-----------------------------------------------------------------
</TABLE>
[_] A.G. Edwards noted that the Petro Stand Alone
discounted cash flow values were greater than
the implied equity value being paid for
Petro's heating oil assets of $25.5 million,
as calculated on page C-5 of Appendix I.
Page 17
<PAGE>
SUMMARY OF OBSERVATIONS AND CONCLUSIONS
(continued)
<TABLE>
<CAPTION>
DISCOUNTED CASH FLOW STAR GAS STAND ALONE
-------------------------------------------------------------------
ANALYSIS (continued) 15 YEAR TERMINAL VALUE EBITDA MULTIPLE
-------------------------------------------------
9.0x 9.5x 10.0x 10.5x 11.0x
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
6.8% $92,914 $99,255 $105,597 $111,939 $118,281
WACC 7.0% 91,847 98,141 104,436 110,730 117,024
7.2% 90,790 97,037 103,284 109,532 115,779
-------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------
30 YEAR TERMINAL VALUE EBITDA MULTIPLE
-------------------------------------------------
9.0x 9.5x 10.0x 10.5x 11.0x
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
6.8% $103,675 $110,428 $117,181 $123,935 $130,688
WACC 7.0% 102,537 109,240 115,942 122,645 129,347
7.2% 101,410 108,062 114,714 121,367 128,019
-------------------------------------------------------------------
<CAPTION>
STAR GAS PRO FORMA
-------------------------------------------------------------------
15 YEAR TERMINAL VALUE EBITDA MULTIPLE
-------------------------------------------------
9.0x 9.5x 10.0x 10.5x 11.0x
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
7.3% $128,663 $136,782 $144,902 $153,021 $161,141
WACC 7.5% 127,328 135,389 143,449 151,510 159,570
7.7% 126,006 134,008 142,010 150,012 158,014
-------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------
30 YEAR TERMINAL VALUE EBITDA MULTIPLE
------------------------------------------------
9.0x 9.5x 10.0x 10.5x 11.0x
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
7.3% $139,743 $148,282 $156,820 $165,358 $173,896
WACC 7.5% 138,338 146,815 155,291 163,767 172,243
7.7% 136,946 145,360 153,775 162,190 170,605
-------------------------------------------------------------------
</TABLE>
[_] A.G. Edwards noted that the Star Gas Pro
Forma discounted cash flow values were
greater than (1) the Star Gas Stand Alone
discounted cash flow values and (2) the
current equity market value of Star Gas of
$124.9 million as of October 14, 1998.
Page 18
<PAGE>
SUMMARY OF OBSERVATIONS AND CONCLUSIONS
(continued)
COMPARABLE [_] A.G. Edwards noted that public disclosure
TRANSACTIONS ANALYSIS regarding transactions in the retail home heating
oil distribution industry was extremely limited.
[_] A.G. Edwards analyzed the financial terms
related to divestitures by Petro of certain of
its retail home heating oil branches and
compared them to the implied multiples of the
aggregate purchase price of Petro's heating oil
assets.
[_] Petro has sold three branches for an average
EBITDA multiple of 9.0x.
-----------------------
[_] A.G. Edwards calculated the purchase price of
Petro's heating oil assets and calculated
multiples based on Petro's EBITDAs. (See
Appendix I - "Comparable Transaction Analysis")
-------------------------------------------------------
Purchase Price of Heating Oil Assets
-------------------------------------
<TABLE>
<S> <C>
Equity purchase price of heating oil assets
including SIRs $ 25,549
Cost of debt to be Redeemed ($206,250 + $2,844 premium) 209,094
Cost of Debt to be Assumed 69,646
Cost of Preferred stock at Redemption Value 31,767
Consent Fees 2,110
Transaction Fees 19,343
--------
Aggregate purchase price of heating oil assets $357,509
--------
</TABLE>
Multiples
-------------------------------------------------------
<TABLE>
<CAPTION>
Notes
--------------------------------
15 - Year 30 - Year
---------------- ---------------
<S> <C> <C> <C> <C> <C>
1997 Normalized EBITDA (a) - - 43,040 8.3x As a multiple of aggregate
transaction value.
Normalized 1998 EBITDA budget (a) 44,749 8.0x 46,900 7.6x As a multiple of aggregate
transaction value.
1999 Projected EBITDA (a) 46,463 7.7x 48,706 7.3x As a multiple of aggregate
transaction value.
</TABLE>
______________________________________________________
(a) Calculated as gross profit minus SG&A expense and
direct delivery expense.
Page 19
<PAGE>
SUMMARY OF OBSERVATIONS AND CONCLUSIONS
(continued)
PUBLIC COMPANY [_] A.G. Edwards compared certain financial and market
ANALYSIS information of Star Gas on a historical and pro
forma basis to that of certain public propane
master limited partnerships which A.G. Edwards
deemed relevant for the purposes of this analysis.
A.G. Edwards reviewed the trading multiples of a
total of six master limited partnerships. (See
Appendix J - "Public Company Analysis")
[_] The selected propane master limited partnerships
are as follows:
<TABLE>
<S> <C>
- AmeriGas Partners, L.P. - Heritage Propane Partners, L.P.
- Cornerstone Propane Partners, L.P. - National Propane Partners, L.P.
- Ferrellgas Partners, L.P. - Suburban Propane Partners, L.P.
</TABLE>
[_] No partnership used in the analysis is identical to
Star Gas.
<TABLE>
<CAPTION>
========================================================================================================
PUBLIC COMPARABLE COMPANIES (a)
========================================================================================================
Star Pro Forma Star Public Company Public Company
----------------- ------------------
15-Year 30-Year 15-Year 30-Year Medians Ranges
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Yield 11.2% 11.2% 11.8% 11.8% 10.1% 9.1% to 23.3%
Firm value/LTM EBITDA (b) 12.5x 12.5x 10.0x 10.0x 11.6x 9.0x to 12.7x
Firm value/1999E EBITDA 10.2x 9.6x 8.1x 7.7x 9.2x 8.4x to 11.1x
Equity Market Cap/LTM DCF (c) 15.4x 15.4x 12.5x 12.5x 13.4x 8.1x to 15.3x
Equity Market Cap/1999E DCF 10.6x 9.6x 8.1x 7.4x 9.8x 4.9x to 12.2x
--------------------------------------------------------------------------------------------------------
</TABLE>
(a) Public comparable companies include: APU, CNO, FGP,
HPG, NPL and SPH.
(b) Firm value/adjusted for actual 1998 budget EBITDA for
Star and Pro Forma Star.
(c) Equity market cap/adjusted for actual 1998 budget
EBITDA for Star and Pro Forma Star.
Page 20
<PAGE>
Appendix I to
FAIRNESS OPINION PRESENTATION TO THE
SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF
STAR GAS CORPORATION
Analyses performed under 30-year weather scenario
CONFIDENTIAL
A.G. EDWARDS & SONS, INC.
INVESTMENT BANKING
October 16, 1998
<PAGE>
TABLE OF CONTENTS
Section
-------
Overview of Petroleum Heat and Power Co., Inc.................... A
Overview of Star Gas Partners, L.P............................... B
Summary of the Transaction....................................... C
Implied Unit Value Analysis...................................... D
Pro Forma Merger Analysis........................................ E
Merger Premiums to Market Value Analysis......................... F
Relative Contribution Analysis................................... G
Discounted Cash Flow Analysis.................................... H
Comparable Transactions Analysis................................. I
Public Company Analysis.......................................... J
Pro Forma Model.................................................. K
<PAGE>
Overview of Petroleum Heat and Power Co., Inc. ("Petro")
Selected Financial Data
($ in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Historical Years Ended December 31,
-------------------------------------------------------------------------------------------------------------
1993 % 1994(a) % 1995(a) % 1996 % 1997 %
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $538,526 100.0% $546,677 100.0% $609,507 100.0% $608,161 100.0% $548,141 100.0%
% Growth 1.5% 11.5% -0.2% -9.9%
Cost of sales 366,810 68.1% 362,981 66.4% 387,825 63.6% 427,388 70.3% 379,748 69.3%
------------------ ------------------ ------------------ ------------------ ------------------
Gross profit 171,717 31.9% 183,696 33.6% 221,682 36.4% 180,773 29.7% 168,393 30.7%
SG&A expenses 93,379 17.3% 95,314 17.4% 128,295 21.0% 105,601 17.4% 102,377 18.7%
Direct delivery
expense 29,902 5.6% 32,995 6.0% 36,634 6.0% 33,102 5.4% 30,006 5.5%
Restructuring
charges - - - 1,150 0.2% 2,850 0.5%
Corporate
identity
expenses - - - 2,659 0.4% 4,136 0.8%
Pension
curtailment
expense - - - 557 0.1% 654 0.1%
Amortization
of customer
lists 23,183 4.3% 19,748 3.6% 20,527 3.4% 18,611 3.1% 17,903 3.3%
Depreciation
of plant and
equipment 5,933 1.1% 6,469 1.2% 12,374 2.0% 6,574 1.1% 7,204 1.3%
Amortization of
deferred charges 5,548 1.0% 6,177 1.1% 6,142 1.0% 4,760 0.8% 4,639 0.8%
Provision for
supplemental
benefits 264 0.0% 373 0.1% 1,407 0.2% 873 0.1% 565 0.1%
------------------ ------------------ ------------------ ------------------ ------------------
Operating income
(loss) 13,509 2.5% 22,619 4.1% 16,303 2.7% 6,886 1.1% (1,941) -0.4%
Interest expense,
net (20,508) -3.8% (23,766) -4.3% (38,792) -6.4% (32,412) -5.3% (31,668) -5.8%
Other income
(expense) (165) 0.0% 109 0.0% 218 0.0% 1,842 0.3% 11,445 2.1%
------------------ ------------------ ------------------ ------------------ ------------------
Loss before income
taxes, equity
interest and
extraordinary item (7,164) -1.3% (1,038) -0.2% (22,271) -3.7% (23,684) -3.9% (22,164) -4.0%
Income taxes 400 0.1% 600 0.1% 500 0.1% 500 0.1% 500 0.1%
------------------ ------------------ ------------------ ------------------ ------------------
Loss before equity
interest and
extraordinary item (7,564) -1.4% (1,638) -0.3% (22,771) -3.7% (24,184) -4.0% (22,664) -4.1%
Share of income
(loss) of Gas - 0.0% (1,973) -0.4% 728 0.1% 2,283 0.4% 235 0.0%
------------------ ------------------ ------------------ ------------------ ------------------
Extraordinary
item-loss on early
extinguishment of
debt (867) -0.2% (655) -0.1% (1,436) -0.2% (6,414) -1.1% -
------------------ ------------------ ------------------ ------------------ ------------------
Net loss (8,431) -1.6% (4,266) -0.8% (23,479) -3.9% (28,315) -4.7% (22,899) -4.2%
Preferred stock
dividends (3,367) -0.6% (3,510) -0.6% (3,263) -0.5% (2,389) -0.4% (4,644) -0.8%
------------------ ------------------ ------------------ ------------------ ------------------
Net loss to common ($11,798) -2.2% ($7,776) -1.4% ($26,742) -4.4% ($30,704) -5.0% ($27,543) -5.0%
================== ================== ================== ================== ==================
Net loss per share ($0.55) ($0.36) ($1.06) ($1.20) ($1.06)
========= ========= ========= ========= =========
Weighted average
shares out-
standing (b) 21,538 21,745 25,309 25,581 26,039
EBITDA (c) $48,437 9.0% $55,387 10.1% $56,753 9.3% $42,070 6.9% $36,010 6.6%
Adjusted net loss
to common (10,931) -2.0% (d) (7,121) -1.3% (e) (25,306) -4.2% (f) (22,583) -3.7% (g) (35,439) -6.5% (h)
Adjusted net loss
per share ($0.51) ($0.33) ($1.00) ($0.88) ($1.36)
========= ========= ========= ========= =========
Acquisition
capital
expenditures $15,399 $26,411 $26,438 $28,493 $16,252
Maintenance
capital
expenditures (i) 3,000 3,000 3,000 3,000 3,000
EBITDA/total
assets 18.9% 13.9% 15.9% 15.3% 14.5%
Distributable
cash flow 24,528 28,020 14,461 6,158 842
</TABLE>
- --------------------------------------------------------------------------------
(a) Star Gas operations consolidated into Petro.
(b) Weighted shares do not include Class B shares.
(c) Calculated as gross profit minus SG&A expense and direct delivery expense.
(d) Excludes $867 for early extinguishment of debt.
(e) Excludes $655 for early extinguishment of debt.
(f) Excludes $1,436 for early extinguishment of debt.
(g) Excludes $6,414 for early extinguishment of debt.
(h) Excludes $11,400 gain on sale of TLC.
(i) Management's estimates.
Page A-1
<PAGE>
OVERVIEW OF PETRO
EBITDA RECONCILIATION: 1997(a)
($) IN THOUSANDS)
<TABLE>
<CAPTION>
================================================================================
PETRO
-----
<S> <C>
1997 Actual EBITDA $36,010
NORMALIZING ADJUSTMENTS:
Weather was 3.8% warmer than 30-year normal
3.8% of 1997 budgeted retail gallons 13,482 gallons
Gross profit margin $0.4545
Delivery and garage cost savings ($0.0814)
------
Net impact per gallon $0.3731
$ impact 5,030
Insurance reserve 2,000
------
1997 Normalized EBITDA $43,040
======
- --------------------------------------------------------------------------------
</TABLE>
(a) Management's assumptions.
Page A-2
<PAGE>
OVERVIEW OF PETRO
EBITDA RECONCILIATION: 1997 - 1998 (a)
($ in thousands)
<TABLE>
<CAPTION>
============================================================================================
PETRO
-----
<S> <C> <C>
1997 Normalized EBITDA $43,040
Volume Adjustments for 1998
Sale of TLC Division in 1997 (16,926) gallons
Attrition in 1998 (4.1%) (17,375)
1997 Acquisitions 9,828
-----
(24,473) gallons
@
$0.1700/gallon (b) (4,159)
Gross Profit Margin Increase $0.006 per gallon on 395,086 gallons (c) 2,371
Inflation (3,662)
Operating Cost Reductions (d) 5,850
Non-Budgeted Operating Expense
Eliminations (e) 3,460
------
Normalized 1998 EBITDA Budget $46,900
======
- --------------------------------------------------------------------------------------------
</TABLE>
(a) Management's assumptions.
(b) Represents the average gross profit per gallon ($.4700 per gallon) offset
by $.30 per gallon reduction in operating expenses.
(c) Actual gross profit margin increase achieved in first quarter of 1998 was
$5.9 million (156 million gallons @ $0.037/gallon).
(d) Represents already accomplished reductions as of 12/31/97 in branch,
regional and corporate expenses in excess of normal indexing related to
volume reductions as well as 1% productivity improvements.
(e) Represent specific operating expense eliminations that have already been
accomplished.
Page A - 3
<PAGE>
OVERVIEW OF PETRO
EBITDA RECONCILIATION: NON-BUDGETED OPERATING EXPENSE ELIMINATIONS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
BASE EXPENSE
------------
<S> <C>
Exton PA Facility Rent $ 500
Corporate Staff Reductions - Salary & Benefits
Alex Tyshovnytsky 310
Allen Levenson 279
Joe Massoud 310
Total Staff Reductions 900
Wage Freeze - Non-Union 1,373
Wage Freeze - Union 687
------------
Total $ 3,460
</TABLE>
Page A-4
<PAGE>
OVERVIEW OF PETRO
EBITDA RECONCILIATION: 1998 (a)
($ in thousands)
<TABLE>
<CAPTION>
=====================================================================
PETRO
-----
<S> <C>
Normalized 1998 EBITDA Budget $46,900
Actual Differential between first seven months of
Fiscal 1998 vs. Budget (11,741)
Revised margin improvement based on results from the
first seven months of Fiscal 1998 2,471
-------
Adjusted for Actual 1998 EBITDA Budget $37,630
=======
</TABLE>
- ---------------------------------------------------------------------
(a) Management's assumptions.
Page A-5
<PAGE>
OVERVIEW OF PETRO
EBITDA RECONCILIATION: 1998-1999 (a)
($ in thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
PETRO
-----
<S> <C>
Normalized 1998 EBITDA Budget $46,900
Attrition (3.8%) and Inflation (3.0%) partially offset by $0.01 Margin Increase in 1999 (1,352)
Acquisition Growth
$30,000 of acquisitions at 4.75 x multiple using half-year convention (b) 3,158
-------
1999 Projected $48,706
</TABLE>
_______________________________________________________________
(a) Management's assumptions.
(b) A.G. Edwards' assumption.
Page A-6
<PAGE>
OVERVIEW OF PETRO
EBITDA SUMMARY
($ in thousands)
<TABLE>
<CAPTION>
---------------------------------------------------------
PETRO
-----
<S> <C>
1997 Actual $36,010
1997 Normalized $43,040
Normalized 1998 Budget $46,900
Adjusted for Actual 1998 Budget $37,630
1999 Projected $48,706
- ---------------------------------------------------------------
</TABLE>
Page A-7
<PAGE>
OVERVIEW OF PETRO
EBITDA PROJECTIONS
($ IN THOUSANDS)
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADJUSTED FOR
ACTUAL NORMALIZED PROJECTED
-----------------------------------
1998 1998 1999 2000 2001 2002
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EBITDA $37,630 $46,900 $48,706 $51,196 $53,390 $55,385
- --------------------------------------------------------------------------------
</TABLE>
MAJOR ASSUMPTIONS FOR 1999 - 2002
---------------------------------
[_] 30 Year Weather
[_] Flat Attrition.
[_] $30 million of acquisitions at 4.75x EBITDA multiple using half-year
convention.
[_] Increase in gross profit margin of $0.01 in 1999 and $0.005 annually in
2000 to 2002.
Page A-8
<PAGE>
OVERVIEW OF PETRO
ATTRITION ANALYSIS
<TABLE>
<CAPTION>
====================================================================================================================
Average Accounts Absolute Account Losses Loss Rate Gains
------------------------------ ---------------------------- --------------- ---------------------
Base Business, Base Business,
Year Total excl. Acquisitions Total excl. Acquisitions Total Base Accounts %
- --------- --------- ------------------ ------- ------------------- ----- ------ ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1993 391,454 352,576 70,127 56,459 17.9% 16.0% 47,090 12.0%
1994 386,235 354,786 57,442 46,386 14.9% 13.1% 35,380 9.2%
1995 381,842 344,342 59,550 46,366 15.6% 13.5% 34,516 9.0%
1996 386,398 354,471 60,084 48,860 15.5% 13.8% 39,192 10.1%
1997 366,421 342,738 60,407 52,581 16.5% 15.3% 39,561 10.8%
- --------------------------------------------------------------------------------------------------------------------
Mean 382,470 349,783 61,522 50,130 16.1% 14.3% 39,148 10.2%
- --------------------------------------------------------------------------------------------------------------------
6/98 YTD 342,065 328,112 48,485 43,967 14.2% 13.4% 38,296 10.8%
<CAPTION>
Net Attrition Rate
-----------------------------
Base
Year Total Business
- --------- ----------- --------------
<S> <C> <C>
1993 -5.9% -4.0%
1994 -5.7% -3.9%
1995 -6.6% -4.5%
1996 -5.4% -3.7%
1997 -5.8% -4.5%
- --------------------------------------------
Mean -5.9% -4.1%
- --------------------------------------------
6/98 YTD -5.8% -2.6%
</TABLE>
Page A-9
<PAGE>
Overview of Petro
Acquisition History
($ in thousands)
<TABLE>
<CAPTION>
Date EBITDA Acquired Cost per
Acquired Company Purchase Price EBITDA Multiple Gallonage Gallon
- -------- ------- -------------- ------ -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
1/26/93 Houck Service $663.9 $245.0 2.7x 807.2 $0.823
1/28/93 Harris and Gans 1,607.9 475.0 3.4x 2,599.6 0.619
5/28/93 Goodrich 2,397.7 672.0 3.6x 4,156.0 0.577
6/4/93 Warren 2,965.0 712.0 4.2x 14,448.3 0.205
6/23/93 Savin 1,655.4 403.0 4.1x 2,769.0 0.598
6/25/93 Baylis and Baylis 989.3 251.0 3.9x 1,224.7 0.808
7/28/93 Agway 1,660.6 315.0 5.3x 2,708.5 0.613
9/28/93 Garden State 1,015.2 312.0 3.3x 1,408.0 0.721
9/29/93 Essex 866.3 234.0 3.7x 2,649.4 0.327
--------- ------- ------- --------- -------
1993 Totals $13,821 $3,619 3.8x 32,771 $0.422
========= ======= ======= ========= =======
1/7/94 Petrilla Oil $189.5 $53.4 3.5x 329.0 $0.576
3/8/94 Rettig 1,813.0 466.0 3.9x 4,930.0 0.368
6/30/94 Deblois Oil 15,374.6 2,909.0 5.3x 19,869.0 0.774
7/26/94 Herbert Fuel 5,133.0 882.0 5.8x 6,103.0 0.841
7/28/94 Trico Fuel 3,126.3 930.0 3.4x 4,091.0 0.764
9/1/94 Stickley 1,261.4 355.0 3.6x 1,702.0 0.741
9/13/94 Sinkler 4,880.0 948.0 5.1x 7,433.0 0.657
12/1/94 Ryan 2,954.3 528.0 5.6x 4,804.0 0.615
12/2/94 Fowler 182.8 37.4 4.9x 354.0 0.516
--------- ------- ------- --------- -------
1994 Totals $34,915 $7,109 4.9x 49,615 $0.704
========= ======= ======= ========= =======
3/30/95 Reliable Oil $6,065.6 $1,183.0 5.1x 10,102.2 $0.600
5/24/95 Rosetta (Waldman) 3,413.2 684.0 5.0x 5,153.6 0.662
5/24/95 Rosetta (Price) 789.4 153.0 5.2x 1,309.5 0.603
7/27/95 Slocum 643.8 198.0 3.3x 742.6 0.867
8/23/95 Contex 1,856.8 448.0 4.1x 2,503.2 0.742
8/31/95 Rackliffe 546.2 139.0 3.9x 904.0 0.604
9/1/95 A-One 5,184.2 1,164.0 4.5x 5,900.0 0.879
9/11/95 Reading Merchants 4,260.0 656.0 6.5x 3,613.0 1.179
10/25/95 Franklin Fuel 293.5 76.0 3.9x 445.0 0.660
11/17/95 Home Fuel 2,158.9 430.0 5.0x 6,072.3 0.356
12/19/95 Texaco 3,854.8 1,071.0 3.6x 5,845.1 0.659
--------- ------- ------- --------- -------
1995 Totals $29,066 $6,202 4.7x 42,590 $0.682
========= ======= ======= ========= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Overview of Petro
Acquisition History
($ in thousands)
(continued) ---------------------------------------------------------------------------------------------------------------
Date EBITDA Acquired Cost per
Acquired Company Purchase Price EDITDA Multiple Gallonage Gallon
-------- ------- -------------- ------ -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
1/11/96 Garrison $5,242.5 $1,154.0 4.5x 6,017.0 $0.871
1/19/96 Cibro 4,367.6 1,087.0 4.0x 6,200.0 0.704
2/1/96 Seaman 7,133.7 1,552.0 4.6x 7,522.0 0.948
4/1/96 McDowell 2,723.5 669.0 4.1x 2,675.0 1.018
9/11/96 Flynn 1,038.0 232.0 4.5x 1,316.0 0.789
9/24/96 Farren 263.6 69.0 3.8x 481.0 0.548
10/18/96 Bergen 3,202.5 718.0 4.5x 5,933.0 0.540
10/18/96 Hightstown 233.5 62.0 3.8x 500.0 0.467
10/31/96 Hy-Test 813.4 177.0 4.6x 1,468.0 0.554
12/18/96 Dexter 331.9 99.0 3.4x 796.0 0.417
12/26/96 Sherman 492.5 103.0 4.8x 564.0 0.873
12/27/96 Malco 369.2 97.0 3.8x 988.0 0.374
12/30/96 Grasso 422.9 116.0 3.6x 1,212.0 0.349
-------- -------- -------- -------- --------
1996 Total $26,635 $6,135 4.3x 35,672 $0.747
======== ======== ======== ======== ========
1/15/97 Oils Inc $747.6 $188.0 4.0x 1,189.0 $0.629
4/14/97 Mugullian Fuel 2,801.9 638.0 4.4x 3,000.0 0.934
5/14/97 Alderfer Heating 401.1 111.0 3.6x 787.0 0.510
6/26/97 Bellomo 1,488.8 443.0 3.4x 1,657.0 0.898
7/10/97 Good 521.4 117.0 4.5x 1,200.0 0.434
8/29/97 Oil Burner 2,633.1 603.0 4.4x 3,500.0 0.752
9/10/97 Romary 2,252.5 545.0 4.1x 2,348.0 0.959
9/29/97 T.W. Perry 1,619.3 439.0 3.7x 2,118.0 0.765
10/1/97 Millbrook 527.5 112.0 4.7x 908.0 0.581
11/24/97 Shreve 1,457.0 300.0 4.9x 2,425.0 0.601
12/18/97 Genovese 1,010.8 281.0 3.6x 1,522.0 0.664
======== ======== ======== ======== ========
1997 Totals $15,461 $3,777 4.1x 20,654 $0.749
======== ======== ======== ======== ========
5 YEAR TOTALS $119,898 $26,842 4.5x 181,302 $0.661
======== ======== ======== ======== ========
</TABLE>
<PAGE>
Overview of Petro
Divestiture History
($ in thousands)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A.G. Edwards noted that Date EBITDA Acquired Cost per
public disclosure Divested Branch Purchaser Purchase Price EBITDA Multiple Gallonage Gallon
regarding transactions -------- ------ --------- -------------- ------ -------- --------- ------
in the retail home 3/30/95 New Hampshire Bellemore Heating Oil, Inc. $1,477 $150 9.8x 6,060 $0.244
heating oil distribution 6/28/96 Punderson Ultramar Energy, Inc. $4,073 $443 9.2x 6,900 $0.590
industry was extremely 11/4/97 TLC Heating Oil Partners, L.P. $16,100 $2,005 8.0x 23,000 $0.700
limited. A.G. Edwards ----
analyzed the financial
terms related to the Mean: 9.0x
divestitures by Petro of ----
certain of its retail home
heating oil branches.
</TABLE>
Page A-12
<PAGE>
Overview of Petro
Margin Analysis
(Volume in gallons; gallons and $ in thousands, except margins)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Fiscal Years Ended December 31,
---------------------------------------------------------------
1993 1994 1995 1996 1997
---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
RETAIL (a)
Volume 355,347 360,207 343,759 375,121 338,478
Margin $ 0.4883 $ 0.5030 $ 0.5027 $ 0.4993 $ 0.5196
-------- -------- -------- -------- --------
Gross profit $173,501 $181,202 $172,811 $187,290 $175,867
COMMERCIAL
Volume 81,515 79,514 75,476 81,020 71,813
Margin $ 0.2301 $ 0.2416 $ 0.2458 $ 0.2471 $ 0.2452
-------- -------- -------- -------- --------
Gross profit $ 18,755 $ 19,214 $ 18,554 $ 20,018 $ 17,607
PROPANE
Volume 6,625 7,435 5,538 -- --
Margin $ 0.5352 $ 0.5730 $ 0.5805 $ 0.0000 $ 0.0000
-------- -------- -------- -------- --------
Gross profit $ 3,546 $ 4,260 $ 3,215 -- --
OTHER PETROLEUM PRODUCTS
Volume 36,406 35,709 31,228 32,026 29,855
Margin $ 0.1424 $ 0.1417 $ 0.1481 $ 0.1401 $ 0.1424
-------- -------- -------- -------- --------
Gross profit $ 5,183 $ 5,061 $ 4,624 $ 4,487 $ 4,251
TOTAL PETROLEUM PRODUCTS
Volume 479,893 482,865 456,001 488,167 440,146
Margin $ 0.4188 $ 0.4344 $ 0.4368 $ 0.4339 $ 0.4492
-------- -------- -------- -------- --------
Gross profit $200,985 $209,737 $199,204 $211,795 $197,725
-------- -------- -------- -------- --------
DISCOUNTS $ 1,294 $ 1,200 $ 944 $ 1,084 $ 802
-------- -------- -------- -------- --------
Net service loss ($34,243) ($37,941) ($33,822) ($37,386) ($35,184)
Net installation income 3,681 4,944 4,364 5,280 5,050
-------- -------- -------- -------- --------
Gross profit (loss) ($30,562) ($32,997) ($29,458) ($32,106) ($30,134)
-------- -------- -------- -------- --------
GAS GROSS PROFIT -- $ 5,756 $ 50,992 -- --
Total gross profit $171,717 $183,696 $221,682 $180,773 $168,393
======== ======== ======== ======== ========
</TABLE>
- ---------------------------------------
(a) Includes protected price ventures
<PAGE>
Overview of Petro
Discounted Cash Flow Analysis
Weighted Average Cost of Capital Derivation
($ in millions)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Total Implied Total Total
Market Unit Total Market Debt/ Debt as % Un-
Levered Val. Debt Price at Units Value of Total of Total levered
Comparable Company Beta (a) (Bk = Mkt) (10/14/98) Out (Mil) Equity Equity Capital Beta
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriGas Partners, L.P. 0.42 $711.1 $24.125 41.9 $1,031.2 69.0% 40.8% 0.249
Cornerstone Propane Partners, L.P. 0.45 240.9 18.000 19.9 365.2 66.0% 39.8% 0.271
Ferrellgas Partners, L.P. 0.46 504.1 20.000 31.3 638.6 78.9% 44.1% 0.257
Heritage Propane Partners, L.P. 0.42 177.8 20.813 8.5 180.0 98.8% 49.7% 0.211
National Propane Partners, L.P. 0.61 145.5 9.438 11.2 108.2 134.5% 57.4% 0.260
Star Gas Partners, L.P. 0.39 109.8 19.563 6.3 124.9 87.9% 46.8% 0.208
Suburban Propane Partners, L.P. 0.40 427.9 19.625 28.7 575.3 74.4% 42.7% 0.229
<CAPTION>
<S> <C>
Comparable group's average unlevered beta: 0.24
Petro's debt - to - equity ratio: 1123.5%
Petro's debt as a percent of total capital: 91.8%
Comparable group's beta relevered for Petro's capital structure: 2.945
======
Petro's capitalization at market
Total debt (b) $310.0 91.8%
Common equity 27.6 8.2%
------ ------
100.0% $337.6
<CAPTION>
Derivation of Weighted Average Cost of Capital:
- -----------------------------------------------
<S> <C> Market Risk Premium Range (e)
-----------------------------
Petro's theoretical levered beta (d): 2.945 11.3% 12.3% 13.3%
Assumed % of equity in Petro's capital structure: 8.2% -----------------------------
Risk - free rate of return (c): 4.6% <S> <C> <C>
Petro's cost of equity range (at various market risk premiums): 37.9% 40.8% 43.8%
Petro's assumed tax rate: 0.0% ===== ===== =====
Assumed % of debt in capital structure (b): 91.8%
Petro's estimated cost of debt (f): 11.2%
Petro's estimated after-tax cost of debt: 11.2% 11.2% 11.2% 11.2%
-----------------------------
Petro's weighted average cost of capital range (g): 13.4% 13.6% 13.9%
- --------------------------------------------------------------- -----------------------------
</TABLE>
(a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the
number of weeks available, which may be less than 143) adjusted beta
relative to the S&P 500 index.
(b) Includes preferred stock; not net of cash.
(c) Ten - year Treasury rate on October 14, 1998.
(d) Bloomberg's reported beta for Petro is .60.
(e) Ibbotson Associates 1997. Total returns for small company stocks of 17.7%
minus the risk-free rule.
(f) Based on Petro's current debt structure.
(g) Calculation based upon use of the Capital Asset Pricing Model (CAPM).
Page A-14
<PAGE>
Overview of Petro
Summary of Capital Structure
($ in thousands)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
6/30/98 10/14/98
Book Value Coupon Market Price Market Value
------------ ---------- -------------- ----------------
<S> <C> <C> <C> <C>
Debt:
Credit Agreement
Working Capital facility $ 0 7.75% NA $ 0
Acquisition facility 0 7.75% NA 0
Notes payable
Notes payable for fuel oil dealer purchases, etc. 14,528 8.0%-10.0% NA 14,528
11.85%, 12.17%, 12.18% Senior Notes 60,000 11.96% NA 60,000
14.1% Subordinated and Senior 6,200 14.10% NA 6,200
10.125% Subordinated 50,000 10.13% 92.50% 46,250
9.375% Subordinated Debentures 75,000 9.38% 92.50% 69,375
12.25% Subordinated Debentures 81,250 12.25% 92.50% 76,781
Total debt $ 286,978 $ 273,134
Effective cost of debt 11.0%
Preferred Stock:
Redeemable preferred stock $ 8,334 14.34% NA 8,334
12.875% Exchangeable preferred stock 30,000 12.88% NA 30,000
Adjustment to balance sheet (1,480) NA (1,480)
Total preferred stock $ 36,854 $ 38,854
Effective cost of preferred stock 13.2%
Total Debt and Preferred Stock $ 323,832 $309,988
Effective cost of debt and preferred stock 11.2%
</TABLE>
Page A-15
<PAGE>
OVERVIEW OF PETRO
SUMMARY OF CAPITAL STRUCTURE
($ IN THOUSANDS EXCEPT PER SHARE)
(continued)
<TABLE>
<CAPTION>
======================================================================================================
9/30/98 10/14/98
SHARES OUT MARKET PRICE MARKET VALUE
---------- ------------ ------------
<S> <C> <C> <C>
EQUITY:
Common Stock
Class A 23,964,962 $ 1.031 $24,714
Class B 11,228 17.776 (a) 200
Class C 2,597,519 NA (b) 2,679
TOTAL EQUITY $27,592
EFFECTIVE COST OF EQUITY 40.8%
TOTAL CAPITALIZATION $337,580
WACC 13.6%
Less: Cash 33,223
NET CAPITALIZATION $304,357
NET MARKET MARKET VALUE
% OF OWNERSHIP VALUE OF STAR GAS OF INTEREST
-------------- ----------------- ------------
LESS:
Interest in Star Gas 40.7% $234,147 $95,204
TOTAL CAPITALIZATION OF PETRO WITHOUT INTEREST IN STAR GAS $242,376
</TABLE>
(a) Market price is calculated as: $17.50+$0.276
(b) Market price is assumed to equal that of the Class A shares, since the
Class C shares do not trade.
Page A-16
<PAGE>
OVERVIEW OF PETRO
Price and Volume
12/15/95 - 12/31/97
[GRAPH APPEARS HERE]
Page A-17
<PAGE>
OVERVIEW OF PETRO
Price and Volume
1/1/98 - 10/14/98
[GRAPH APPEARS HERE]
Page A-18
<PAGE>
Overview of Petro
Class A Common Stock Trading History -- Volume Distribution
1995-1998(a)
<TABLE>
<CAPTION>
Market Price
Pre-Announcement Price
Implied Offer Price
-----------------------------------------------------------------------------------------------------------------------------
1995 1996 1997 1998(a) 1995-1998(a)
------------------ ------------------ ------------------ ------------------- -----------------
Price Per Share Volume % Volume % Volume % Volume % Volume %
-------------------- ------------------ ------------------ ------------------ ------------------- -----------------
<S> <C> <C> <C> <C> <C>
Greater Than $9.400
9.200 9.400 600 100.00% 600 99.42%
9.000 9.200 0 99.99% 99.42%
8.800 9.000 49,200 99.99% 49,200 99.42%
8.600 8.800 6,800 99.41% 6,800 99.26%
8.400 8.600 67,500 99.33% 67,500 99.24%
8.200 8.400 289,100 98.54% 289,100 99.02%
8.000 8.200 161,500 95.13% 1,600 100.00% 163,100 98.07%
7.800 8.000 873,500 93.22% 47,400 99.96% 920,900 97.54%
7.600 7.800 245,800 82.92% 236,200 98.87% 482,000 94.52%
7.400 7.600 193,300 80.02% 185,000 93.44% 378,300 92.94%
7.200 7.400 1,154,800 77.74% 822,300 89.19% 1,977,100 91.70%
7.000 7.200 5,190,500 64.12% 1,507,100 70.28% 6,697,600 85.23%
6.800 7.000 246,000 2.90% 815,700 35.63% 1,061,700 63.30%
6.600 6.800 498,500 16.88% 498,500 59.82%
6.400 6.600 129,300 5.42% 417,300 100.00% 546,600 58.19%
6.200 6.400 37,600 2.45% 526,900 96.34% 564,500 56.40%
6.000 6.200 44,100 1.58% 417,700 91.72% 461,800 54.55%
5.800 6.000 24,700 0.57% 110,200 88.06% 134,900 53.04%
5.600 5.800 868,000 87.09% 868,000 52.60%
5.400 5.600 143,300 79.48% 143,300 49.76%
5.200 5.400 92,600 78.22% 92,600 49.29%
5.000 5.200 940,500 77.41% 940,500 48.98%
4.800 5.000 142,200 69.16% 142,200 45.90%
4.600 4.800 20,200 67.92% 20,200 45.44%
4.400 4.600 13,900 67.74% 13,900 45.37%
4.200 4.400 - 67.62% - 45.33%
4.000 4.200 - 67.62% - 45.33%
3.800 4.000 117,100 67.62% 117,100 45.33%
3.600 3.800 370,600 66.59% 370,600 44.94%
3.400 3.600 250,900 63.34% 250,900 43.73%
3.200 3.400 1,236,200 61.14% 1,236,200 42.91%
3.000 3.200 1,652,500 50.30% 1,652,500 38.86%
2.800 3.000 2,785,300 35.81% 130,000 100.00% 2,915,300 33.45%
2.600 2.800 788,500 11.39% 249,100 97.94% 1,037,600 23.90%
---------------------------------------------------------------------------------------------------------------------
2.400 2.600 430,100 4.47% 270,800 93.99% 700,900 20.50%
---------------------------------------------------------------------------------------------------------------------
2.200 2.400 79,800 0.70% 964,300 89.70% 1,044,100 18.21%
2.000 2.200 345,000 74.40% 345,000 14.79%
---------------------------------------------------------------------------------------------------------------------
1.800 2.000 1,789,900 68.93% 1,789,900 13.66%
---------------------------------------------------------------------------------------------------------------------
1.600 1.800 804,500 40.55% 804,500 7.80%
1.400 1.600 1,542,400 27.80% 1,542,400 5.16%
1.200 1.400 34,800 3.34% 34,800 0.11%
---------------------------------------------------------------------------------------------------------------------
1.000 1.200 175,900 2.79% 175,900 0.58%
---------------------------------------------------------------------------------------------------------------------
Less Than $1.000
--------- --------- ---------- --------- ----------
Total Stock for Period 8,478,600 4,349,500 11,403,800 6,306,700 30,538,600
Cumulative % of Total Traded 27.76% 14.24% 37.34% 20.65% 100.00%
% Traded of Current Stock
Out.(b) 35.38% 18.15% 47.59% 26.32% 127.43%
% Traded of Current Float(c) 91.99% 47.19% 123.73% 68.43% 331.34%
Wtd. Average Stock Price $7.31 $7.07 $3.90 $1.90 $4.89
</TABLE>
- --------------
(a) Through October 14, 1998.
(b) Based on 23,964,962 Class A shares outstanding.
(c) Based on 9,216,760 Class A shares held by institutional and retail public
holders.
Page A-19
<PAGE>
Overview of Petro
Shareholder Analysis (a)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A % of Total
Institutions (b) Shrs. Held % of Total Voting Power
- ---------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Dimensional Fund Adv. 639,700 2.7% 1.3%
CNA Financial Group 360,900 1.5% 0.7%
Barclays Bank plc 340,573 1.4% 0.7%
Deltec Asset Mgmt. 230,810 1.0% 0.5%
Vanguard Group 215,500 0.9% 0.4%
Robert Fleming Holdings 200,000 0.8% 0.4%
Bear, Stearns & Co. 148,238 0.6% 0.3%
Mellon Bank 119,904 0.5% 0.2%
Northern Trust 84,611 0.4% 0.2%
ANB Investment Mgmt. 51,100 0.2% 0.1%
Prudential Insurance 48,200 0.2% 0.1%
First Source Bank 40,000 0.2% 0.1%
World Asset Management 33,937 0.1% 0.1%
IBM Retirement Funds 16,300 0.1% 0.0%
DLJ Corp. 4,502 0.0% 0.0%
Legg Mason 2,000 0.0% 0.0%
------------ ------------ ------------
All Institutions (c) 2,536,275 10.6% 5.1%
</TABLE>
<TABLE>
<CAPTION>
Class A % of Class C % of Total % of Total
Directors and Officers (c) Title Shrs. Held Total Shrs. Held Total Voting Power Voting Power
- ----------------------------- -------------- ---------- ------ ---------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Audrey L. Sevin Director and
Secretary of
Petro and Star 1,876,863 7.8% 477,716 18.4% 6,654,023 13.3%
Irik P. Sevin Chairman, CEO
and Director
of Petro 740,438 3.1% 201,641 7.8% 2,756,848 5.5%
Philip Ean Cohen Director of
Petro 679,262 2.8% 113,423 4.4% 1,813,492 3.6%
Thomas J. Edelman Director of
Petro and Star 653,312 2.7% 129,019 5.0% 1,943,502 3.9%
Vincent De Palma VP and GM of
New York
Region 5,000 0.0% - 0.0% 5,000 0.0%
Hanseatic Corporation
(d) (e) 1,777,279 7.4% 298,717 11.5% 4,764,449 9.5%
Tortosa (d) - 0.0% 298,717 11.5% 2,987,170 6.0%
Hubertus Langen (d) 734,473 3.1% 9,038 0.3% 824,853 1.7%
Wolfgang Traber (e) Director of
Petro and Star - 0.0% 9,038 0.3% 90,380 0.2%
Paul Biddelman (e) Director of
Petro and Star 2,386 0.0% - 0.0% 2,386 0.0%
----------- ------- ----------- ------- ------------- ------------
Total Directors &
Officers Holdings 6,469,013 27.0% 1,537,309 59.2% 21,842,103 43.7%
</TABLE>
<TABLE>
<CAPTION>
Class A % of Class C % of Total % of Total
5% Beneficial Owners and Affiliates Shrs. Held Total Shrs. Held Total Voting Power Voting Power
- ----------------------------------- ---------- ------ ---------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Frank Russell Company (f) 2,611,000 10.9% - 0.0% 2,611,000 5.2%
Schneider Capital 2,491,165 10.4% - 0.0% 2,491,165 5.0%
Richard O'Connell 1,128,745 4.7% 302,461 11.6% 4,153,355 8.3%
Brentwood Corp. 681,873 2.8% 120,985 4.7% 1,891,723 3.8%
Barcel Corporation 605,151 2.5% 151,231 5.8% 2,117,461 4.2%
Gabes S.A. 597,617 2.5% 124,314 4.8% 1,840,757 3.7%
United Capital Corp. 90,000 0.4% - 0.0% 90,000 0.2%
Minneford Corp. 73,638 0.3% 12,000 0.5% 193,638 0.4%
Fernando Montero - 0.0% 35,287 1.4% 352,870 0.7%
M.M. Warburg & Co. - 0.0% 31,808 1.2% 318,080 0.6%
----------- ------- ----------- ------- ------------- ------------
Total 5% Beneficial Holdings 8,279,189 34.5% 778,086 30.0% 16,060,049 32.2%
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Summary
- -------
% of % of Total % of Total
Class A Total Class C Total Voting Power Voting Power
----------- ------ ---------- ------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Insider Holdings
Directors and Officers as a Group 6,469,013 27.0% 1,537,309 59.2% 21,842,103 43.7%
5% Beneficial Owners and Affiliates 8,279,189 34.5% 778,086 30.0% 16,060,049 32.2%
----------- ------- ----------- ------- ------------- ------------
14,748,202 61.5% 2,315,395 89.1% 37,902,152 75.9%
Public Holdings
Institutional 2,536,275 10.6% 2,536,275 5.1%
Retail 6,680,485 (g) 27.9% 282,124 10.9% 9,501,725 19.0%
----------- ------- ----------- ------- ------------- ------------
9,216,760 38.5% 282,124 10.9% 12,038,000 24.1%
Total 23,964,962 100.0% 2,597,519 100.0% 49,940,152 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------------------
(a) Based on shares outstanding, most recently available data as of 10/14/98 and
does not include options to purchase and Class B shares.
(b) Source: Bloomberg and Petro's Proxy.
(c) Does not include 5% beneficial ownership institutions.
(d) Hanseatic Corporation holds shared voting power in Tortosa. Tortosa is owned
and controlled by Mr. Langen.
(e) Mr. Traber and Mr. Biddelman are executive officers of Hanseatic
Corporation.
(f) Frank Russell Company shares beneficial ownership of 1,943,835 Class A with
Schneider Capital.
(g) AGE has 29,080 Class A shares in its system.
<PAGE>
[CAPTION]
<TABLE>
Overview of Petro
Research Coverage
While Petro had decent Research Coverage Date Published Estimates Updated
coverage in 1996, it has ----------------- -------------- -----------------
not had much support <S> <C> <C>
in recent months.
Published Research Reports
Freeman Securities* 8/17/98 --
KDP Investment Advisors* 8/1/98 --
SAMCO Capital Markets* 8/1/98 --
Bear Stearns 9/5/96 10/18/96
DLJ 8/2/96 --
PaineWebber 7/16/96 11/11/97
Additional Research
Jefferies - Hold
Earnings Estimates Number of Estimates Mean 1998 Mean 1999
------------------ ------------------- --------- ---------
IBES 1 ($1.25) NA
Nelson 1 ($1.25) NA
</TABLE>
-----------------------
*Fixed income research.
Page A-21
<PAGE>
Overview of Star Gas Partners, L.P. ("Star Gas")
Selected Financial Data
($ in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Historical Years Ended September 30,
----------------------------------------------------------------------------
1996 % 1997 % 1997(a) %
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales $119,634 100.0% $135,159 100.0% $149,766 100.0%
% growth 17.0% 13.0% 25.2% (b)
Cost of sales 58,557 48.9% 72,211 53.4% 80,370 53.7%
------------------- ------------------- --------------------
Gross profit 61,077 51.1% 62,948 46.6% 69,396 46.3%
Operating expenses 41,207 34.4% 43,245 32.0% (c) 46,408 31.0%
Net (loss) on sales of assets (260) -0.2% (295) -0.2% (265) -0.2%
Depreciation and amortization 9,808 8.2% 10,405 7.7% 11,495 7.7%
------------------- ------------------- --------------------
Operating income 9,802 8.2% 9,003 6.7% 11,228 7.5%
Interest expense, net 7,124 6.0% 6,966 5.2% 7,766 5.2%
------------------- ------------------- --------------------
Income (loss) before income taxes 2,678 2.2% 2,037 1.5% 3,462 2.3%
Income taxes 85 0.1% 25 0.0% 25 0.0%
General Partners' interest -- 0.0% 40 0.0% 69 0.0%
------------------- ------------------- --------------------
Net income $ 2,593 2.2% $ 1,972 1.5% $ 3,368 2.2%
=================== =================== ====================
Net income per limited partner unit $ 0.49 $ 0.37 $ 0.54
======== ======== ========
Weighted average L.P. unit outstanding 5,271 5,271 6,228
EBITDA (d) $ 19,870 16.6% $ 19,703 14.6% $ 22,988 15.3%
Capital expenditures $ 5,332 $ 5,279 $ 5,579
Maintenance capital expenditures 2,300 3,100 3,400
Distributable cash flow 10,361 9,612 11,797
Distributable cash flow per unit $ 1.97 $ 1.82 $ 1.89
Common distribution coverage 1.8x 1.5x 1.4x
Total distribution coverage 0.9x 0.8x 0.8x
EBITDA/total assets 12.7% 13.4% 12.8%
</TABLE>
- ------------------------------------------------------
(a) Proforma for December 16, 1997 common unit offering and the acquisition of
Pearl Gas Co.
(b) Growth over 1996.
(c) Includes $350 in special project expenses.
(d) Excludes loss from sale of assets.
Page B-1
<PAGE>
Overview of Star Gas
EBITDA Reconciliation: 1997(a)
($ in thousands)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
Star Gas
--------
<S> <C>
1997 Actual EBITDA $19,703(b)
NORMALIZING ADJUSTMENTS:
Weather
Residential - 1,125 gallons @ 0.7106 margin 799
Commercial - 277 gallons @ 0.4459 margin 124
Margin
Residential - 50,832 gallons @ (0.7106 - 0.6995) (564)
Commercial - 19,864 gallons @ (0.4454 - 0.4348) (220)
Wholesale - 38,404 gallons @ (0.0975 - 0.0675) (1,152)
Compensation (56)
Elimination of strategic expense 902(c)
Pearl Gas EBITDA 3,012
Pearl Gas acquisition adjustments 273(d)
-------
1997 Adjusted EBITDA $22,821
=======
-------------------------------------------------------------------------------------
</TABLE>
(a) Management's assumptions.
(b) Not pro forma for Pearl Gas acquisition.
(c) Certain expenses including the exploration of strategic
alternatives by Morgan Stanley.
(d) Certain cost savings, primarily salary and benefit expenses
of certain selling shareholders.
Page B-2
<PAGE>
Overview of Star Gas
EBITDA Reconciliation: 1997 - 1999(a)
($ in thousands)
-------------------------------------------------------------------
Star Gas
--------
Normalized 1998 EBITDA Budget $22,135
Approximate Differential between first ten
months of Fiscal 1998 vs. Budget (3,354)
-------
Adjusted for Actual 1998 EBITDA Budget $18,781
=======
Normalized 1998 EBITDA Budget $22,135
Acquisition Growth
1998 acquisitions 1,585
$10 million of acquisitions at 6.5x multiple
completed on 4/1/99 using half-year
convention 771
-------
1999 EBITDA Projected $24,491
=======
--------------------------------------------------------------------
(a) Management's assumptions.
Page B-3
<PAGE>
Overview of Star Gas
EBITDA Projections
($ in thousands)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Adjusted for
Actual Normalized Projected
-----------------------------------------------
1998 1998 1999 2000 2001 2002
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EBITDA $18,781 $22,135 $24,491 $26,029 $27,566 $29,104
--------------------------------------------------------------------------------------------
</TABLE>
Major Assumptions for 1999 - 2002
---------------------------------
[_] 30 Year Weather
[_] No growth in base business.
[_] $10 million of acquisitions at 6.5x EBITDA multiple
using half-year convention.
[_] No increase in gross profit margin.
Page B-4
<PAGE>
OVERVIEW OF STAR GAS
ACQUISITION HISTORY
($ IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
DATE EBITDA ACQUIRED COST PER
ACQUIRED COMPANY PURCHASE PRICE EBITDA MULTIPLE GALLONAGE GALLON
-------- ------- ------------- ------ -------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
6/15/94 Loveland $ 700 $ 127 5.5x 433 $1.616
11/24/94 Baystate $ 1,450 $ 209 6.9x 769 $1.886
9/12/95 Debolt $ 950 $ 151 6.3x 852 $1.115
3/22/96 Bob White L.P. Gas/
Mitchell Bottle Gas $ 1,500 $ 263 5.7x 898 $1.671
7/22/96 Fuzzy Moore $ 850 $ 147 5.8x 454 $1.871
10/22/97 Pearl Gas Co. $24,126 $3,288 7.3x 14,000 $1.723
2/20/98 Tri-County Gas $ 550 $ 108 5.1x 320 $1.720
5/28/98 Knowles LP Gas $ 3,000 $ 426 7.0x 1,021 $2.939
5/28/98 Tioga Petroleum $ 1,200 $ 257 4.7x 668 $1.795
7/30/98 Lowe Bros & Dad $ 3,750 $ 602 6.2x 1,965 $1.908
8/11/98 Myers Propane $ 1,200 $ 191 6.3x 572 $2.099
----------- ------ ------ -------- ------
4 YEAR TOTALS $39,276 $5,769 6.8x 21,952 $1.789
=========== ====== ====== ======== ======
</TABLE>
Page B-5
<PAGE>
OVERVIEW OF STAR GAS
MARGIN ANALYSIS
(volume in gallons, gallons and $ in thousands, except margins)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal Years Ended September 30,
------------------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1997 1997
------------ -------- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stand Alone Pro Forma Pro Forma Pearl and
Weather Weather
Residential
Volume 44,590 48,430 45,235 54,336 49,707 50,832 62,630
Margin $ 0.6902 $ 0.6861 $ 0.6677 $ 0.6592 $ 0.7106 $ 0.7106 $ 0.6554
------------ -------- -------- -------- ------------ ------------ ------------
Gross profit $ 30,777 $ 33,228 $ 30,203 $ 35,818 $ 35,322 $ 36,121 $ 41,049
Commercial
Volume 17,617 19,875 18,831 21,194 19,587 19,864 20,936
Margin $ 0.4614 $ 0.4611 $ 0.4271 $ 0.4202 $ 0.4459 $ 0.4459 $ 0.4399
------------ -------- -------- -------- ------------ ------------ ------------
Gross profit $ 8,129 $ 9,164 $ 8,043 $ 8,906 $ 8,734 $ 8,858 $ 9,209
Argriculture
Volume 23,291 16,053 15,080 12,567 17,338 17,338 18,275
Margin $ 0.2349 $ 0.2630 $ 0.2357 $ 0.2556 $ 0.2694 $ 0.2694 $ 0.2678
------------ -------- -------- -------- ------------ ------------ ------------
Gross profit $ 5,471 $ 4,222 $ 3,554 $ 3,212 $ 4,671 $ 4,671 $ 4,895
Motor Fuel & other
Volume 7,581 8,060 8,056 8,197 8,024 8,024 8,391
Margin $ 0.4922 $ 0.5359 $ 0.5271 $ 0.5215 $ 0.5765 $ 0.5765 $ 0.5926
------------ -------- -------- -------- ------------ ------------ ------------
Gross profit $ 3,731 $ 4,319 $ 4,246 $ 4,275 $ 4,626 $ 4,626 $ 4,973
Wholesale
Volume 51,493 45,318 38,941 39,025 38,404 38,404 38,532
Margin $ 0.0619 $ 0.0680 $ 0.0568 $ 0.0704 $ 0.0975 $ 0.0975 $ 0.0972
------------ -------- -------- -------- ------------ ------------ ------------
Gross profit $ 3,189 $ 3,082 $ 2,212 $ 2,747 $ 3,743 $ 3,743 $ 3,744
Total Propane
Volume 144,572 137,736 126,143 135,319 133,060 134,462 148,764
Margin $ 0.3548 $ 0.3922 $ 0.3826 $ 0.4061 $ 0.4291 $ 0.4315 $ 0.4293
------------ -------- -------- -------- ------------ ------------ ------------
Total propane
gross profit $ 51,297 $ 54,015 $ 48,258 $ 54,958 $ 57,096 $ 58,019 $ 63,870
------------ -------- -------- -------- ------------ ------------ ------------
Appliances/other
Revenue $ 9,237 $ 9,454 $ 7,536 $ 8,269 $ 8,043 $ 8,403 $ 8,760
Cost 3,232 3,187 1,935 2,150 2,191 2,191 2,303
------------ -------- -------- -------- ------------ ------------ ------------
Gross Profit $ 6,005 $ 6,267 $ 5,601 $ 6,119 $ 5,852 $ 5,852 $ 6,457
Total gross profit $ 57,302 $ 60,282 $ 53,859 $ 61,077 $ 62,948 $ 63,871 $ 70,327
============ ======== ======== ======== ============ ============ ============
</TABLE>
Page B-6
<PAGE>
OVERVIEW OF STAR GAS
DISCOUNTED CASH FLOW ANALYSIS
WEIGHTED AVERAGE COST OF CAPITAL DERIVATION
($ IN MILLIONS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Implied Total Total
Market Unit Total Market Debt/ Debt as % Un-
Levered Val. Debt Price at Units Value of Total of Total levered
Comparable Company Beta (a) (Bk = Mkt) (10/14/98) Ont. (Mil) Equity Equity Capital Beta
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriGas Partners, L.P. 0.42 $711.1 $24.125 41.9 $1,031.2 69.0% 40.8% 0.249
Cornerstone Propane Partners, L.P. 0.45 240.9 18.000 19.9 365.2 66.0% 39.8% 0.271
Ferrellgas Partners, L.P. 0.46 504.1 20.000 31.3 638.6 78.9% 44.1% 0.257
Heritage Propane Partners, L.P. 0.42 177.8 20.813 8.5 180.0 98.8% 49.7% 0.211
National Propane Partners, L.P. 0.61 145.5 9.438 11.2 108.2 134.5% 57.4% 0.260
Star Gas Partners, L.P. 0.39 109.8 19.563 6.3 124.9 87.9% 46.8% 0.208
Suburban Propane Partners, L.P. 0.40 427.9 19.625 28.7 575.3 74.4% 42.7% 0.229
<CAPTION>
Comparable group's average ----------------------------------------------
unlevered beta: 0.24 Star's capitalization-at market (b)
Star's debt-to-equity ratio(b): 87.9% <S> <C> <C>
Star's debt as a percent of total Total debt $109.8 46.8%
capital(b): 46.8% Common 124.9 53.2%
Comparable group's beta relevered ------ ------
for Star's capital structure: 0.378 $234.6 100.0%
===== ----------------------------------------------
<CAPTION>
Derivation of Weighted Average Cost of Capital: Market Risk Premium Range (d)
- ---------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11.3% 12.3% 13.3%
Star's theoretical levered beta: 0.378 -------------------------------------
Assumed % of equity in Star's capital structure(b): 53.2%
Risk-free rate of return(c): 4.6%
Star's cost of equity range (at various market risk premiums): 8.9% 9.3% 9.6%
==== ==== ====
Star's assumed tax rate: 35.0%
Assumed % of debt in capital structure(b): 46.8%
Star's estimated cost of debt(e): 6.9%
Star's estimated after-tax cost of debt: 4.5% 4.5% 4.5% 4.5%
-------------------------------------
Star's weighted average cost of capital range(f): 6.8% 7.0% 7.2%
-------------------------------------
</TABLE>
- -----------------
(a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the
number of weeks available, which may be less than 143) adjusted beta
relative to the S&P 500 index.
(b) Market value of debt is assumed to equal book value; debt is not net of
cash.
(c) Ten-year Treasury rate on October 14, 1998.
(d) Ibbotson Associates 1997. Total returns for small company stocks of 17.7%
minus the risk-free rate.
(e) Based on Star current debt structure.
(f) Calculation based upon use of the Capital Asset Pricing Model (CAPM).
<PAGE>
Overview of Star Gas
Summary of Capital Structure
($ in thousands)
9/30/98 10/14/98
Book Value Coupon Market Price Market Value
---------- ------ ------------ ------------
Debt:
Credit Agreement
Working Capital facility $4,785 7.25% Not applicable $4,785
Acquisition facility 9,000 7.25% Not applicable 9,000
Notes payable
8.04% First Mortgage Notes 85,000 8.04% NA 85,000
7.17% First Mortgage Notes 11,000 7.17% NA 11,000
Total debt: $109,785
Effective cost of debt 6.9%
After-tax cost of debt 4.5%
9/30/98 10/14/98
Shares Out Market Price Market Value
---------- ------------ ------------
Equity:
Common units 3,858,999 $19,563 $75,492
Subordinated units 2,396,078 NA (a) 46,873
General Partner 2,497 (b)
Total Equity $124,862
Effective cost of equity 9.3%
Total Capitalization $234,647
WACC 7.0%
Less: Cash $500
Net Capitalization $234,147
(a) Market price assumed to equal common units.
(b) Implied 2% general partner interest.
Page B-8
<PAGE>
Overview of Star Gas
Price and Volume
12/15/95 - 12/31/97
[GRAPH APPEARS HERE]
Page B-9
<PAGE>
OVERVIEW OF STAR GAS
Price and Volume
1/1/98 - 10/14/98
[GRAPH APPEARS HERE]
Page B-10
<PAGE>
Overview of Star Gas
Common Unit Trading History - Volume Distribution
1995 - 1998 (a)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Dec. 15-31 1995 1996 1997 1998(a) 1995-1998(a)
----------------- -------------------- -------------------- -------------------- --------------------
Price Per Unit Volume % Volume % Volume % Volume % Volume %
----------------------- ----------------- -------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C>
Greater Than $24.600
24.400 24.600 32,400 100.00% 32,400 100.00%
24.200 24.400 55,300 99.34% 26,000 100.00% 75,500 99.69% 156,800 99.73%
24.000 24.200 27,200 98.20% 25,800 99.24% - 97.19% 53,000 98.44%
23.800 24.000 436,500 97.65% 38,400 98.49% - 97.19% 474,900 98.00%
23.600 23.800 119,200 88.71% 3,000 97.37% 131,200 97.19% 253,400 94.08%
23.400 23.600 79,500 86.27% 56,900 97.28% 85,600 92.83% 222,000 91.98%
23.200 23.400 105,000 84.64% 194,500 95.62% 173,700 89.99% 473,200 90.15%
23.000 23.200 396,900 82.49% 148,000 89.94% 51,400 84.22% 596,300 86.24%
22.800 23.000 229,200 74.36% 102,100 85.62% 36,200 82.52% 367,500 81.32%
22.600 22.800 96,100 69.67% 184,500 82.64% 42,700 81.32% 323,300 78.28%
22.400 22.600 273,800 67.70% 145,500 77.26% 192,300 79.90% 611,600 75.61%
22.200 22.400 33,400 100.00% 430,500 62.09% 128,000 73.01% 710,900 73.51% 1,302,800 70.56%
22.000 22.200 762,000 95.80% 510,900 53.28% 217,500 69.27% 256,500 49.91% 1,746,900 59.80%
21.800 22.000 400,400 42.82% 411,600 62.92% 395,800 41.40% 1,207,800 45.37%
Pre-
Announcement
-----------------------------------------------------------------------------------------------------------------------------
Price 21.600 21.800 422,600 34.62% 302,200 50.91% 243,600 28.26% 968,400 35.40%
-----------------------------------------------------------------------------------------------------------------------------
21.400 21.600 259,400 25.96% 290,200 42.09% 161,600 20.17% 711,200 27.40%
21.200 21.400 214,300 20.65% 372,800 33.62% 106,200 14.80% 693,300 21.53%
21.000 21.200 388,000 16.26% 499,100 22.74% 151,500 11.28% 1,038,600 15.80%
20.800 21.000 110,900 8.32% 108,000 8.17% 64,700 6.25% 283,600 7.22%
20.600 20.800 137,500 6.05% 34,300 5.01% 33,000 4.10% 204,800 4.88%
20.400 20.600 41,900 3.23% 16,000 4.01% 21,600 3.00% 79,500 3.19%
20.200 20.400 62,800 2.38% 46,500 3.55% 19,000 2.29% 128,300 2.53%
20.000 20.200 53,200 1.09% 22,000 2.19% - 1.66% 75,200 1.47%
19.800 20.000 24,400 1.55% - 1.66% 24,400 0.85%
19.600 19.800 28,600 0.83% - 1.66% 28,600 0.65%
Market
-----------------------------------------------------------------------------------------------------------------------------
Price 19.400 19.600 - 1.66% - 0.41%
-----------------------------------------------------------------------------------------------------------------------------
19.200 19.400 - 1.66% - 0.41%
19.000 19.200 - 1.66% - 0.41%
18.800 19.000 16,700 1.66% 16,700 0.41%
18.600 18.800 33,200 1.10% 33,200 0.27%
18.400 18.600 9,200 0.31%
Less Than 18.400
--------- ----------- ----------- ----------- ------------
Total Units for Period 795,400 4,883,500 3.425,900 3,012,100 12,107,700
Cumulative % of
Total Traded 6.57% 40.33% 28.30% 24.88% 100.00%
% Traded of Current
Units Out. (b) 20.61% 126.55% 88.78% 78.05% 313.75%
Wtd. Average Unit Price $22.11 $22.25 $21.89 $22.14 $22.12
</TABLE>
- ----------------------------------
(a) Through October 14, 1998.
(b) Based on 3,858,999 common units outstanding.
<PAGE>
OVERVIEW OF STAR GAS
SHAREHOLDER ANALYSIS (a)
<TABLE>
<CAPTION>
====================================================================================================================================
Common
Institutions (b) Units Held % of Total
- ---------------- ---------- ----------
<S> <C> <C>
Bear, Stearns & Co. 53,200 1.4%
Graver Bokhof 28,900 0.7%
DLJ Corp. 24,950 0.6%
The Vanguard Group 13,800 0.4%
Advest Group, Inc. 12,015 0.3%
PaineWebber Group 9,870 0.3%
Legg Mason Wood Walker 500 0.0%
U.S. Trust Co. NY 500 0.0%
Cullen/Frost Bankers 300 0.0%
---------- ----------
All Institutions 144,035 3.7%
<CAPTION>
Common Subordinated
Directors and Officers Title Units Held % of Total Units Held % of Total
- ---------------------- -------------------------------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Wolfgang Traber Star Director and Petro Director 10,400 0.3% - 0.0%
Richard F. Ambury V.P. of Finance 525 0.0% - 0.0%
Total Directors & Officers Holdings ---------- ---------- ------------ ----------
10,925 0.3% - 0.0%
General Partner Common Subordinated
- --------------- Units Held % of Total Units Held % of Total
Petro ---------- ---------- ------------ ----------
60,727 1.6% 2,396,078 100.0%
<CAPTION>
- ------------------------------------------------------------------------ --------------------------------------------------------
Summary Common Subordinated
- ------- Units % of Total Units % of Total
---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Insider Holdings
Directors and Officers as a Group 10,925 0.3% - 0.0%
General Partner 60,727 1.6% 2,396,078 100.0%
---------- ---------- ------------ ----------
71,652 1.9% 2,396,078 100.0%
Public Holdings
Institutional 144,035 3.7%
Retail 3,643,312 (c) 94.4%
---------- ----------
3,787,347 98.1%
Total Units Outstanding 3,858,999 100.0% 2,396,078 100.0%
========================================================================
=================================================================================================================================
</TABLE>
________________________________________
(a) Based on units outstanding and most recently available data as of 10/14/98.
(b) Source: Bloomberg.
(c) AGE has 362,910 Common Units in its system.
Page B-12
<PAGE>
OVERVIEW OF STAR GAS
RESEARCH COVERAGE
<TABLE>
<CAPTION>
Star Gas has ongoing
research coverage by
two firms. Research Coverage Date Published Estimates Updated
----------------- -------------- -----------------
<S> <C> <C> <C> <C>
Published Research Reports
A.G. Edwards - Buy 1/5/98 8/25/98
PaineWebber - Attractive 12/30/97 8/3/98
Lehman 2/7/96 11/4/96
Earnings Estimates Number of Estimates Mean 1998 Mean 1999
------------------ ------------------- --------- ---------
IBES 2 NA NA
Nelson 2 ($0.14) $0.65
Zacks 2 ($0.19) $0.48
</TABLE>
Page B-13
<PAGE>
SUMMARY OF THE TRANSACTION
PRO FORMA STAR GAS UNITS OUTSTANDING
(IN THOUSANDS EXCEPT PER SHARE AND PER UNIT)
[_] There are currently 6,383 Star Gas units
outstanding comprised of 3,859 common units, 2,396
subordinated units and 128 implied general partner
("GP") units. The subordinated units and GP units
are currently assets of Petro.
[_] There are currently 26,574 shares of Petro common
stock outstanding held by public shareholders and
"affiliates." The public holds 14,327 Class A
shares, 11 Class B shares and 282 Class C shares.
The "affiliates" hold 11,953 shares which include
9,638 Class A shares and 2,315 Class C shares.
[_] Each shareholder of Petro will receive a certain
number of units in Star Gas such that the implied
consideration paid for each Petro share averages
$2.43 based on A.G. Edwards' estimates of the
value of the units being offered to Petro as
consideration.
[_] All of the publicly held 14,327 Class A shares and
282 Class C shares, and a portion of the
"affiliate" held Class A shares (5,243) and Class
C shares (1,328) will receive .13064 units of
newly created senior subordinated units for each
share (1,908 units to the public and 859 units to
the "affiliates", 2,767 units in total) with an
attached Contingent Unit ("CU"). See the following
page for a discussion of the Contingent Units.
A.G. Edwards estimates an implied value for these
units of $18.52/unit (see page D-3). The remaining
"affiliates" of Petro not receiving senior
subordinated units, who hold a total of 5,382
shares, will receive .15920 units for a total of
857 junior subordinated and GP units, both of
which will also include attached CUs. A.G. Edwards
estimates an implied value for these units of
$15.41/unit (see page D-6).
[_] The 2,396 subordinated units and 128 GP units
currently owned by Petro will effectively be
retired in the Transaction.
Page C-1
<PAGE>
SUMMARY OF THE TRANSACTION
PRO FORMA STAR GAS UNITS OUTSTANDING
(IN THOUSANDS)
(continued)
DESCRIPTION OF CONTINGENT UNITS
[_] During the five year period, beginning with the
first full four quarters following the Merger, the
senior subordinated units, junior subordinated
units and general partner interests will have the
right to receive up to 909,000 senior subordinated
units upon Petro meeting a "Contingent Unit Test."
Each time the Contingent Unit Test is met, (but
not more frequently than once every four quarter
period), the senior subordinated units, junior
subordinated units and general partner interests
will receive an aggregate of 303,000 senior
subordinated units, subject to a maximum of
909,000 senior subordinated units. The Contingent
Unit Test will be met during any four quarter
period when distributable cash flow per unit
attributable to Petro exceeds $2.90 which is 32%
higher than the current annualized MQD of $2.20
and 26% higher than the proposed MQD of $2.30.
Page C-2
<PAGE>
SUMMARY OF THE TRANSACTION
ALLOCATION OF CURRENT PETRO SHARES OUTSTANDING
(IN THOUSANDS)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Class A Class C Total
----------- --------- ---------
<S> <C> <C> <C>
Groups Receiving Senior Sub
---------------------------
Public 14,327 282 14,609
Affiliates 5,243 1,328 6,572
----------- --------- ---------
Total Receiving Senior Sub 19,570 1,610 21,181
Groups Receiving Junior Sub and GP
----------------------------------
Affiliates 4,395 987 5,382
----------- --------- ---------
Sub Total 23,965 2,598 26,562
=========== =========
Class B 11
---------
Total Shares including Class B 26,574
=========
</TABLE>
Page C-3
<PAGE>
SUMMARY OF THE TRANSACTION
PRO FORMA STAR GAS UNITS OUTSTANDING
PRE-FINANCING ASSUMPTIONS
(IN THOUSANDS)
----------------------------------------------------------
<TABLE>
<CAPTION>
Issued to Petro
-----------------
Types of Units Current Public Affiliates Retired Pro Forma
----------------------- --------- --------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Common 3,859 - - - 3,859
Senior Subordinated - 1,908 859 - 2,767
Subordinated 2,396 - - (2,396) -
Junior Subordinated
& New General Partner - - 857 - 857
Old General Partner 128 - - (128) -
--------- ----------
6,383 7,482
</TABLE>
Page C-4
<PAGE>
SUMMARY OF THE TRANSACTION
EQUITY PURCHASE PRICE CALCULATION
IMPLIED EQUITY VALUE OF PETRO'S ASSETS
($ AND UNITS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Value of Securities
Event Issued to and Retired from Petro
-------------------------------------------------------- -------------------------------------
<S> <C>
Issuance of Senior Subordinated
Units to Public Petro Shareholders 1,908 x $18.52
------------------------------
$35,337
Issuance of Senior Subordinated
Units to Affiliate Petro Shareholders 859 x $18.52
------------------------------
$15,900
Issuance of Junior Subordinated
& General Partner Units to Affiliate Petro Shareholders 857 x $15.41
------------------------------
$13,203
---------
Purchase Price of Petro's Equity $64,439
-----------------------------------------------------------------------------------------------
Divided by 26,562 shares of Petro's Common stock = $2.43 per share
(Excludes 11 Class B Shares)
-----------------------------------------------------------------------------------------------
Retire Subordinated Units held by Petro (2,396) x $15.41
------------------------------
($36,924)
Retire Old General Partner Units held by Petro (128) x $15.41
------------------------------
($1,967)
---------
Equity Value of Petro's Heating Oil Assets $25,549
</TABLE>
Page C-5
<PAGE>
SUMMARY OF THE TRANSACTION
PRO FORMA CAPITAL STRUCTURE
PROJECTED 9/30/98
($ IN THOUSANDS)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
Pro forma
Star Gas Petro Adjustments Star Gas
---------- ------- -------------- ----------
<S> <C> <C> <C> <C>
Debt:
8.04% First Mortgage Notes $85,000 - - $85,000
7.25% WC Revolver 4,785 - - 4,785
7.25% Acquisition Facility 9,000 - - 9,000
7.17% First Mortgage Notes 11,000 - - 11,000
11.96% Senior Notes - $60,000 ($60,000) -
14.10% Senior Notes - 3,100 (3,100) -
14.10% Subordinated Notes - 3,100 (3,100) -
10.13% Sub Notes & Sr Notes - 50,000 (50,000) -
9.38% Sub Notes & Sr Notes - 75,000 (75,000) -
12.25% Sub Notes & Sr Notes - 81,250 (81,250) -
8.00% Existing Acq Notes Payable - 14,508 - 14,508
11.5% Exchanged Debt - - 6,520 6,520
9.0% Exchanged Debt - - 63,126 63,126
9.0% New Debt - - 120,000 120,000
---------- -------- --------- ---------
Total Debt $109,785 $286,958 ($82,804) $313,939
Weighted average cost of Debt 8.6%
Preferred Stock:
14.33% Preferred Stock $ 0 $4,167 ($4,167) $ 0
12.88% Preferred Stock - 30,000 (30,000) -
----------- --------- ---------- ----------
- $34,167 ($34,167) -
Common Equity: $57,206 ($210,486) $115,389 ($37,891)
Estimated Equity Value:
Pro Forma Estimated Estimated
Units Out. Unit Price Market Value
----------- ---------- ------------
Common 10,841 (a) $19.56 (c) $212,086
Senior Subordinated 2,767 (b) 18.52 52,246
Junior Subordinated and GP 857 15.41 13,206
---------- -----------
14,466 $276,538
Total Capitalization: $590,477
Less: Cash and Cash Collateral 21,942
-----------
Net Capitalization $568,535
</TABLE>
(a) Comprised of 3,858 currently outstanding units, 6,879
units to be issued in common unit offering to close
concurrent with the Merger, and 104 units issued as a
consent fee in the Refinancing Transaction.
(b) Includes 2,767 units issued to the Petro shareholders.
(c) Current price of Star Gas (10/14/98) $19,563
Page C - 6
<PAGE>
IMPLIED UNIT VALUE ANALYSIS
COMMON UNITS
[_] A.G. Edwards calculated a range of values for the Senior Subordinated,
Junior Subordinated and General Partner units, based on a required rate of
return, trading yield, and discount to the common units.
<TABLE>
<CAPTION>
=====================================================================================================
1999 2000 2001 2002 Thereafter
------ ------ ------ ------ ------------
<S> <C> <C> <C> <C> <C>
COMMON UNIT
Indicated Distribution $ 2.30 $2.30 $2.30 $2.30 $2.30
Cost of Equity (a) 9.3% 9.3% 9.3% 9.3% 9.3%
------
NPV of future distributions $24.65
------
1999 2000 2001 2002 Thereafter
------ ------ ------ ------ ------------
COMMON UNIT
Indicated Distribution $ 2.30 $2.30 $2.30 $2.30 $2.30
Cost of Equity (a) 9.8% 9.8% 9.8% 9.8% 9.8%
------
NPV of future distributions $23.59
------
1999 2000 2001 2002 Thereafter
------ ------ ------ ------ ------------
COMMON UNIT
Indicated Distribution $ 2.30 $2.30 $2.30 $2.30 $2.30
Cost of Equity (a) 10.2% 10.2% 10.2% 10.2% 10.2%
------
NPV of future distributions $22.62
------
---------------------------------------------------- -----------------------------------
AVERAGE PRICE OF LAST 20 TRADING DAYS: $20.26 CURRENT PRICE (10/14/98 $19.56
IMPLIED YIELD (B): 11.4% CURRENT YIELD (B): 11.8%
---------------------------------------------------- -----------------------------------
</TABLE>
(a) Per Cost of Capital analysis on page D-2.
(b) Assumes a $2.30 distribution.
[_] Certain analysis included in this presentation, including the calculations
of the implied value of the senior subordinated, junior subordinated and GP
units, require an estimate of the future price of the common units at
Closing. To serve as a proxy for this future price, A.G. Edwards used the
average common unit closing price for the last 20 trading days ended October
14, 1998. Such price is 10.4% to 17.8% lower than the common units' implied
unit value per the above analysis, and 3.6% greater than the common units'
most recent closing price on October 14, 1998.
Page D-1
<PAGE>
IMPLIED UNIT VALUE ANALYSIS
THEORETICAL PRO FORMA COST OF EQUITY FOR COMMON UNITS
($ in millions)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Implied Total Total
Market Unit Total Market Debt/ Debt as % Un-
Levered Val. Debt Price at Units Value of Total of Total levered
Comparable Company Beta (a) (Bk=Mkt) (10/14/98) Out. (Mil) Equity Equity Capital Beta
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriGas Partners, L.P. 0.42 $711.1 $24.125 41.9 $1,031.2 69.0% 40.8% 0.249
Cornerstone Propane Partners, L.P. 0.45 240.9 18.000 19.9 365.2 66.0% 39.8% 0.271
Ferrellgas Partners, L.P. 0.46 504.1 20.000 31.3 638.6 78.9% 44.1% 0.257
Heritage Propane Partners, L.P. 0.42 177.8 20.813 8.5 180.0 98.8% 49.7% 0.211
National Propane Partners, L.P. 0.61 145.5 9.438 11.2 108.2 134.5% 57.4% 0.260
Star Gas Partners, L.P. 0.39 109.8 19.563 6.3 124.9 87.9% 46.8% 0.208
Suburban Propane Partners, L.P. 0.40 427.9 19.625 28.7 575.3 74.4% 42.7% 0.229
---------------------------------------------------------
Pro forma capitalization - at market (b)
Comparable group's average unlevered beta: 0.24 Total debt $313.9 53.2%
Pro forma debt-to-equity ratio (b): 113.5% Total equity 276.5 46.8%
------ ------
Pro forma debt as a percent of total capital (b): 53.2% $590.5 100.0%
=========================================================
Comparable group's beta relevered for Pro forma
capital structure: 0.418
Derivation of Weighted Average Cost of Capital: Market Risk Premium Range (d)
- ----------------------------------------------- ---------------------------------
11.3% 12.3% 13.3%
---------------------------------
Pro forma theoretical levered beta: 0.418
Assumed % of equity in Pro forma capital structure (b) 46.8%
Risk-free rate of return (c): 4.6%
Pro forma cost of equity range (at various market risk premiums): 9.3% 9.8% 10.2%
Pro forma assumed tax rate: === === ====
Assumed % of debt in capital structure (b): 35.0%
Pro forma estimated cost of debt (e): 53.2%
Pro forma estimated after-tax cost of debt: 8.6%
5.6% 5.6% 5.6% 5.6%
---------------------------------
Pro forma weighted average cost of capital range (f): 7.3% 7.5% 7.7%
---------------------------------
__________________________________________
(a) Source: Bloomberg, 143 week (maximum weekly time period allowed, or the
number of weeks available, which may be less than 143) adjusted beta
relative to the S&P 500 index.
(b) Market value of debt is assumed to equal book value. See Page C-6 for
equity calculation.
(c) Ten-year Treasury rate on October 14, 1998.
(d) ?????? Associates 1997. Total returns for small company stocks of 17.7%
?????? the risk-free rate.
(e) Based on Pro forma debt structure.
(f) Calculation based upon use of the Capital Asset Pricing Model (CAPM).
</TABLE>
Page D-2
<PAGE>
IMPLIED UNIT VALUE ANALYSIS
SENIOR SUBORDINATED UNITS
- -----------------------------------------------------------------------------
Range
--------------
Required rate of return (a) 20.0% - 30.0% $17.90 - 22.28
Trading yield (b) 11.5% - 13.5% $17.04 - 20.00
Discount to common units (c) 10.0% - 20.0% $16.21 - 18.23
Range $16.21 - 22.28
Adjusted Range (d) $17.04 - 20.00
--------------
Assumed value (e) $18.52
--------------
(a) Represents required rate of return during subordination period, which is
assumed for the minimum three years.
Thereafter, the rate of return is assumed to equal that of the common
units, for a blended required rate of return of 12.4% to 15.3%. Cost per
unit calculations provided on page D-4.
(b) Based on a $2.30 annualized MQD.
(c) Based on a discount to the common unit's average closing price for the
last 20 trading days ended 10/14/98 of $20.26, as referenced on
page D-1.
(d) Represents the middle values of both the range of highs and lows.
(e) Implied required rate of return, trading yield and discount to common
at a unit price of $18.52 are 28.1% during subordination (14.7% blended),
12.4%, and 8.6%, respectively.
Page D-3
<PAGE>
IMPLIED UNIT VALUE ANALYSIS
SENIOR SUBORDINATED UNITS
REQUIRED RATE OF RETURN
===============================================================================
<TABLE>
<CAPTION>
1999 2000 2001 2002(a) Thereafter(a)
------ ------ ------ --------- -------------
<S> <C> <C> <C> <C> <C>
Senior Subordinated Unit (without CU)
Indicated Distribution $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30
Cost of Equity 20.0% 20.0% 20.0% 9.8% 9.8%
-------
NPV of future distributions $ 18.50
-------
CONTINGENT UNIT
Indicated Distribution (b) $ 0 $ 697 $1,394 $2,091 $ 2,091
Cost of equity 20.0% 20.0% 20.0% 9.8% 9.8%
-------
NPV of future distributions $13,699
-------
-------
UNIT VALUE OF SENIOR SUBORDINATED UNIT WITH ATTACHED CU $ 22.28
-------
(Each Unit has claim to 1/3,624 of the Contingent Unit.)
1999 2000 2001 2002(a) Thereafter(a)
------- ------- ------- ------- -------------
SENIOR SUBORDINATED UNIT (WITHOUT CU)
Indicated Distribution $ 2.30 $ 2.30 $2.30 $2.30 $2.30
Cost of Equity 30.0% 30.0% 30.0% 9.8% 9.8%
---------
NPV of future distributions $ 14.91
---------
CONTINGENT UNIT
Indicated Distribution (b) $ 0 $ 697 $1,394 $2,091 $2,091
Cost of Equity 30.0% 30.0% 30.0% 9.8% 9.8%
---------
NPV of future distributions $ 10,806
---------
---------
UNIT VALUE OF SENIOR SUBORDINATED UNIT WITH ATTACHED CU $ 17.90
---------
(Each Unit has claim to 1/3,624 of the Contingent Unit.)
</TABLE>
(a) Distributions made after 2001 are discounted at the cost of equity for the
Common Units, estimated at 9.8%, due to the end of the Subordination
Period.
(b) Assumes that the Contingent Units Test is met in each of the first three
years.
Page D-4
<PAGE>
IMPLIED UNIT VALUE ANALYSIS
THEORETICAL PRO FORMA COST OF EQUITY FOR SENIOR SUBORDINATED UNITS
($ in millions)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Implied Total Total
Market Unit Total Market Debt/ Debt as % Un-
Levered Val. Debt Price at Units Value of Total of Total Levered
Comparable Company Beta (a) (Bk=Mkt) (10/14/98) Out. (Mil) Equity Equity Capital Beta
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriGas Partners, L.P. 0.42 $711.1 $ 24.125 41.9 $1,031.2 69.0% 40.8% 0.249
Cornerstone Propane Partners, L.P. 0.45 240.9 18.000 19.9 365.2 66.0% 39.8% 0.271
Ferrellgas Partners, L.P. 0.46 504.1 20.000 31.3 638.6 78.9% 44.1% 0.257
Heritage Propane Partners, L.P. 0.42 177.8 20.813 8.5 180.0 98.8% 49.7% 0.211
National Propane Partners, L.P. 0.61 145.5 9.438 11.2 108.2 134.5% 57.4% 0.260
Star Gas Partners, L.P. 0.39 109.8 19.563 6.3 124.9 87.9% 46.8% 0.208
Suburban Propane Partners, L.P. 0.40 427.9 19.625 28.7 575.3 74.4% 42.7% 0.229
-----------------------------------------------------------------
Pro forma capitalization - at market (b)
Comparable group's average unlevered beta: 0.24 Total debt $526.0 89.1%
Pro forma debt - to - equity ratio (b): 816.1% Total equity 64.5 10.9%
------ ------
Pro forma debt as a percent of total capital (b): 89.1% $590.5 100.0%
=================================================================
Comparable group's beta relevered for Pro forma 1.518
capital structure: =====
Derivation of Weighted Average Cost of Capital: Market Risk Premium Range (d)
- ----------------------------------------------- ------------------------------------
11.3% 12.3% 13.3%
------------------------------------
Pro forma theoretical levered beta: 1.518
Assumed % of equity in Pro forma capital structure (b): 10.9%
Risk-free rate of return (c): 4.6%
Pro forma cost of equity range (at various market risk premiums): 21.8% 23.3% 24.8%
===== ===== =====
------------------------------------
</TABLE>
_________________________________________
(a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the
number of weeks available, which may be less than 143) adjusted beta
relative to the S&P 500 index.
(b) Market value of debt is assumed to equal book value; debt includes the
market value of pro forma common units; equity includes the value of
senior sub, junior sub units, and GP units.
(c) Ten - year Treasury rate on October 14, 1998.
(d) Ibbotson Associates 1997. Total returns for small company stocks of 17.7%
minus the risk-free rate.
Page D-5
<PAGE>
IMPLIED UNIT VALUE ANALYSIS
JUNIOR SUBORDINATED AND GP UNITS
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Range
-----------------
<S> <C> <C>
Required rate of return (a) 35.0% - 45.0% $14.52 - 16.84
Trading yield (b) 14.0% - 16.0% $14.38 - 16.43
Discount to common units (c) 25.0% - 35.0% $13.17 - 15.19
Range $13.17 - 16.84
Adjusted Range (d) $14.38 - 16.43
-----------------
Assumed value (e) $15.41
-----------------
</TABLE>
(a) Represents required rate of return during subordinated period, which
is assumed for the minimum three years.
Thereafter, the rate of return is assumed to equal that of the
common units, for a blended required rate of return of 16.2% to
18.7%. Cost per unit calculations provided on page D-7.
(b) Based on a $2.30 annualized MQD.
(c) Based on a discount to the common unit's average closing price for
the last 20 trading days ended 10/14/98 of $20.26, as referenced on
page D-1.
(d) Represents the middle values of both the range of highs and lows.
(e) Implied required rate of return, trading yield and discount to
common at a unit price of $15.41 are 39.4% during subordination
(17.6% blended), 14.9%, and 23.9%, respectively.
Page D-6
<PAGE>
IMPLIED UNIT VALUE ANALYSIS
JUNIOR SUBORDINATED AND GP UNITS
REQUIRED RATE OF RETURN
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 2000 2001 2002(A) THEREAFTER(A)
-------- ------- ------- -------- --------------
<S> <C> <C> <C> <C> <C>
JUNIOR SUBORDINATED AND GP UNITS
Indicated Distribution $ 2.30 $2.30 $ 2.30 $2.30 $ 2.30
Cost of Equity 35.0% 35.0% 35.0% 9.8% 9.8%
---------
NPV of future distributions $ 13.49
---------
CONTINGENT UNIT
Indicated Distribution (b) $ 0 $ 697 $1,394 $2,091 $2,091
Cost of Equity (c) 25.0% 25.0% 25.0% 9.8% 9.8%
---------
NPV of future distributions $12,138
---------
---------
UNIT VALUE OF JUNIOR SUBORDINATED AND GP UNIT WITH ATTACHED CU $ 16.84
---------
(Each Unit has claim to 1/3,624 of the Contingent Unit.)
<CAPTION>
1999 2000 2001 2002(A) THEREAFTER(A)
-------- ------- ------- -------- --------------
<S> <C> <C> <C> <C> <C>
JUNIOR SUBORDINATED AND GP UNITS
Indicated Distribution $ 2.30 $2.30 $ 2.30 $2.30 $ 2.30
Cost of Equity 45.0% 45.0% 45.0% 9.8% 9.8%
---------
NPV of future distribution $ 11.17
---------
CONTINGENT UNIT
Indicated Distribution (b) $ 0 $ 697 $1,394 $2,091 $2,091
Cost of Equity (c) 25.0% 25.0% 25.0% 9.8% 9.8%
---------
NPV of future distribution $12,138
---------
---------
UNIT VALUE OF JUNIOR SUBORDINATED AND GP UNIT WITH ATTACHED CU $ 14.52
---------
(Each Unit has claim to 1/3,624 of the Contingent Unit.)
</TABLE>
(a) Distributions made after 2001 are discounted at the cost of equity for the
Common Units, estimated at 9.8%, due to the end of the Subordination Period.
(b) Assumes that the Contingent Units Test is met in each of the first three
years.
(c) Utilized senior subordinated discount rate as CUs convert to senior
subordinated units.
Page D-7
<PAGE>
IMPLIED UNIT VALUE ANALYSIS
THEORETICAL PRO FORMA COST OF EQUITY FOR JUNIOR SUBORDINATED AND GP UNITS
($ in millions)
<TABLE>
<CAPTION>
===================================================================================================================================
TOTAL IMPLIED TOTAL TOTAL
MARKET UNIT TOTAL MARKET DEBT/ DEBT AS % UN-
LEVERED VAL. DEBT PRICE AT UNITS VALUE OF TOTAL OF TOTAL LEVERED
COMPARABLE COMPANY BETA (A) (BK = MKT) (10/14/98) OUT. (MIL) EQUITY EQUITY CAPITAL BETA
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriGas Partners, L.P. 0.42 $711.1 $24.125 41.9 $ 1,031.2 69.0% 40.8% 0.249
Cornerstone Propane Partners, L.P. 0.45 240.9 18.000 19.9 365.2 66.0% 39.8% 0.271
Ferrellgas Partners, L.P. 0.46 504.1 20.000 31.3 638.6 78.9% 44.1% 0.257
Heritage Propane Partners, L.P. 0.42 177.8 20.813 8.5 180.0 98.8% 49.7% 0.211
National Propane Partners, L.P. 0.61 145.5 9.438 11.2 108.2 134.5% 57.4% 0.260
Star Gas Partners, L.P. 0.39 109.8 19.563 6.3 124.9 87.9% 46.8% 0.208
Suburban Propane Partners, L.P. 0.40 427.9 19.625 28.7 575.3 74.4% 42.7% 0.229
--------------------------------------------------
Pro forma Capitalization-at market (b)
Comparable group's average unlevered beta: 0.24 Total debt $577.3 97.8%
Pro forma debt-to-equity ratio (b): 4371.2% Total equity 13.2 2.2%
------ -----
$590.5 100.0%
--------------------------------------------------
Pro forma debt as a percent of total capital (b): 97.8%
Comparable group's beta relevered for Pro forma capital structure: 7.080
=====
DERIVATION OF WEIGHTED AVERAGE COST OF CAPITAL: MARKET RISK PREMIUM RANGE (D)
- ---------------------------------------------- --------------------------------------
11.3% 12.3% 13.3%
--------------------------------------
Pro forma theoretical levered beta: 7.080
Assumed % of equity in Pro forma capital structure (b): 2.2%
Risk-free rate of return (c): 4.6%
Pro forma cost of equity range (at various market risk premiums): 84.6% 91.7% 98.8%
===== ===== =====
--------------------------------------
</TABLE>
____________________________________________
(a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the
number of weeks available, which may be less than 143) adjusted beta
relative to the S&P 500 index.
(b) Market value of debt is assumed to equal book value; debt includes the
market value of common and senior subordinated units; equity includes the
value of junior sub and GP units.
(c) Ten-year Treasury rate on October 14, 1998.
(d) Ibbotson Associates 1997. Total returns for small company stocks of 17.7%
minus the risk-free rate.
Page D-8
<PAGE>
PRO FORMA MERGER ANALYSIS
[_] A.G. Edwards analyzed the impact of the Transaction on the
Partnership's distributable cash flow per unit, the related accretion,
common unit coverage and total unit coverage on a pro forma basis.
<TABLE>
<CAPTION>
------------------------------------------------------------------
STAR GAS STAR GAS
STAND-ALONE PRO FORMA
------------- -----------
<S> <C> <C>
DCF PER UNIT
1998 Adjusted for Actual (a) $1.27 $1.53
1998 Normalized (b) 1.84 2.40
1999 Projected 2.02 2.60
ACCRETION/DILUTION
1998 Adjusted for Actual (a) $0.26
1998 Normalized (b) 0.56
1999 Projected 0.58
COMMON UNIT COVERAGE
1998 Adjusted for Actual (a) 0.96x 0.89x
1998 Normalized (b) 1.38 1.39
1999 Projected 1.51 1.51
TOTAL UNIT COVERAGE
1998 Adjusted for Actual (a) 0.58x 0.66x
1998 Normalized (b) 0.84 1.05
1999 Projected 0.92 1.13
</TABLE>
__________________________________________________________________
(a) Projected results are adjusted for the year to date actual
performance.
(b) Adjusted to represent normal weather.
Page E-1
<PAGE>
Merger Premiums to Market Value Analysis
[_] A.G. Edwards analyzed the premium of the consideration to be
received by Petro Common Shareholders and compared the
premium to Petro's current and historical prices. These
premiums were compared to premiums paid in acquisitions of
majority or remaining interests announced and completed
between January 1, 1996 and October 7, 1998 where the
target's share price one week prior to the announcement date
was either (i) equal to or less than $5, (ii) greater than
$5 and less than $10, or (iii) equal to or greater than $10.
[_] Premiums were calculated one day, one week, four weeks,
three months and one year prior to the announcement of the
agreement in principle for each merger.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Comparison of Premium Paid
--------------------------------------------------------------------------------------------------------------------
Petro at Mean of Transactions Mean of Transactions Mean of Transactions
Premium to stock price prior to $2.43 per Unit Equal to or Greater Than $5 Equal to or
announcement on August 14th: Offer Price Less Than $5 and Less Than $10 Greater Than $10
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One day prior: 29.6% 39.7% 34.3% 28.1%
One week prior: 38.9% 48.8% 42.3% 32.7%
Four weeks prior: 17.8% 55.4% 48.5% 39.6%
Three months prior: 52.5% 67.1% 58.0% 77.9%
One year prior: -19.0% 53.8% 45.8% 53.2%
-----------------------------------------------------------------------------------
Maximum 52.5% 67.1% 58.0% 77.9%
Minimum -19.0% 39.7% 34.3% 28.1%
-----------------------------------------------------------------------------------
</TABLE>
[_] The premium to Petro's current stock price ($1.031 as of
October 14, 1998) was 135.6%.
Page F-1
<PAGE>
Merger Premiums to Market Value Analysis
Mergers with Target Price Equal to or Less than $5 per Share
Announced and Completed 1/1/96-10/9/98
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date Date
Announced Effective Target Name Target Business Description Acquiror Name
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
01/10/96 06/26/96 American Resource Corp Gold mining company REA Gold Corp
01/18/96 08/23/96 AMSERV Healthcare Inc Pvd temp nursing employment Star Multi Care Services Inc
01/23/96 05/09/96 Portage Industries Corp Mnfr extruded plastic sheets Spartech Corp
02/05/96 09/30/96 Customedix Corp Mnfr dental, medical products CUS Acquisitions Inc
02/13/96 07/12/96 Medical Innovations Inc Pvd home health care services Horizon/CMS Healthcare Corp
02/15/96 04/29/96 LDI Corp Computer equip leasing svcs NationsBank Corp, Charlotte, NC
02/28/96 07/11/96 Salton/Maxim Housewares Inc Mnfr electric housewares, fans Windmere Corp
03/13/96 09/27/96 DeSoto Inc Mnfr paints and detergents Keystone Consolidated Inds Inc
04/16/96 05/31/96 CIS Technologies Inc Manufacture computers National Data Corp
04/22/96 06/04/96 Cornerstone Natural Gas Co Natural gas distribution svcs El Paso Field Svcs(El Paso)
05/03/96 03/17/98 Homeowners Group Inc Real estate, insurance agency Cross Country Group Inc
05/06/96 09/03/96 Transcisco Industries Inc Mnfr, service railroad equip Trinity Industries Inc
05/07/96 09/03/96 NMR of America Inc Pvd. medical equip leasing svcs Medical Resources Inc
05/13/96 08/30/96 MDT Corp Mnfr sterility assurance equip Getinge Industries AB
05/15/96 09/10/96 Carlisle Plastics Inc Mnfr, whl plastic prods, resins Tyco International Ltd
06/03/96 01/09/97 Bio-Dental Technologies Corp Provide dental research svcs Zila Inc
06/10/96 07/22/96 SysteMed Inc Pvd medical services Merck-Medco Managed Care Inc
06/11/96 09/03/96 Computer Identics Corp Manufacture bar code scanners Robotic Vision Systems Inc
06/17/96 10/07/96 Scanforms Inc Mnfr business forms Big Flower Press Holdings Inc
06/21/96 08/23/96 Computer Petroleum Corp Information retrieval svcs United Communications Group
06/24/96 12/05/96 MEM Co Inc. Manufacture toiletries Renaissance Cosmetics Inc
07/31/96 11/13/96 Calgene Inc Own and operate greenhouse Monsanto Co
08/13/96 02/27/97 LaTex Resources Inc Oil and gas expln, prodn Alliance Resources PLC
09/10/96 01/03/97 GreenStone Industries Corp Manufacture stationery Louisiana-Pacific Corp
09/11/96 03/04/97 Chempower Inc Insulation, asbestos abatement American Eco Corp
09/16/96 12/06/96 Proler International Corp Whl scrap metals & metals Schnitzer Steel Industries Inc
09/26/96 01/24/97 General Physics Corp Provide training services National Patent Development
10/02/96 12/27/96 Software Publishing Corp Develop software Allegro New Media
10/03/96 11/12/97 Pittencrieff Communications Pvd radiotelephone commun svcs Nextel Communications Inc
10/04/96 12/31/96 Pet Food Warehouse Inc Own, op pet food stores Petco Animal Supplies Inc
10/30/96 12/20/96 Pacific Rehab & Sports Med Own, op rehab hospital Horizon/CMS Healthcare Corp
11/05/96 03/14/97 Panatech Research &
Development Manufacture semiconductors Harbour Group Ltd
11/25/96 02/28/97 American Studios Inc Pvd photography services PCA International Inc
12/06/96 03/18/97 MaxServ Inc (Sears Roebuck) Pvd technical info support svc Sears Roebuck & Co
12/09/96 02/28/97 Houston Biotechnology Inc Mnfr monoclonal antibodies Medarex Inc
01/24/97 07/02/97 INCSTAR Corp (Sorin
Biomedical) Mnfr diagnostic substances American Standard Inc
01/28/97 05/21/97 Calgene Inc (Monsanto Co) Own and operate greenhouse Monsanto Co
01/30/97 08/12/97 AST Research Inc Mnfr computers; dvlp software Samsung Electronic Co Ltd
02/07/97 08/01/97 MS Financial (MS Diversified) Pvd financial credit services Search Financial Services Inc
02/11/97 07/31/97 Serv-Tech Inc Maintenance and cleaning svcs Philip Environmental Inc
03/04/97 06/27/97 Audio King Corp Own, op consumer electn stores Ultimate Electronic Inc
04/15/97 06/30/97 Kurzweil Applied Intelligence Electronic computing equip Lernout & Hauspic Speech
04/30/97 07/25/97 Arden Industrial Products Inc Whl fasteners Park-Ohio Industries Inc
05/01/97 08/01/97 Cryenco Sciences Inc Mnfr liquid gas storage tanks Chart Industries Inc
05/08/97 09/10/97 Imex Medical Systems Inc Mnfr fetal diagnostic instr Nicolet Biomedical Inc
06/16/97 09/30/97 Frederick's of Hollywood, Inc Women's clothing stores Investor Group
06/24/97 07/25/97 Jillians Entertainment Corp Own, op billiard clubs JW Childs Equity Partners LP
07/23/97 12/02/97 Rudy's Restaurant Group Own and operate restaurants Benihana Inc
08/01/97 09/26/97 Community Care of America Inc Own, op nursing homes Integrated Health Services Inc
08/07/97 12/02/97 Magnetic Technologies Corp Manufacture copiers, printers SPS Technologies Inc
08/14/97 12/31/97 Allied Capital Advisers Inc Investment advisory svcs Allied Capital Lending Corp
09/02/97 12/03/97 Ground Round Restaurants Own and operate restaurants GRR Holdings LLC
09/04/97 12/30/97 Cinergi Pictures Entertainment Pvd motion picture prodn svcs Investor Group
09/26/97 09/26/97 Laclede Steel Co Own, operate steel works Birmingham Steel Corp
10/10/97 01/07/98 Puro Water Group Inc Whl bottled water United States Filter Corp
10/13/97 03/19/98 Integrated Brands Inc Produce ice cream Yogen Furz World-Wide Inc
11/03/97 02/25/98 Individual Inc Pvd on-line info retrieval svc Desktop Data Inc
11/04/97 01/12/98 ComputerVision Corp Mnfr computers, peripherals Parametric Technology Corp
11/12/97 03/03/98 PureTec Corp Manufacture plastic products Tekni-Plex Inc
11/24/97 01/07/98 General Host Corp Own, op specialty retail stores Cypress Group LLC
12/02/97 03/17/98 Staodyn Inc Mnfr electromedical equipment Rehabilicare Inc
12/12/97 02/13/98 Impact Systems Inc Paper prodn control systems Voith Sulzer Paper Technology
12/12/97 09/10/98 Timber Lodge Steakhouse Inc Own, op restaurants Santa Barbara Restaurant Group
12/15/97 02/24/98 MetroGolf Inc Own, op golf courses Family Golf Centers Inc
12/22/97 05/20/98 Artistic Greetings Inc Mnfr personalized stationery MDC Communications Corp
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Value of Enter-
Trans- prise
Date Date Acquiror action Value
Announced Effective Target Name Business Description ($ mil) ($ mil)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
01/10/96 06/26/96 American Resource Corp Gold mining company 77.5 76.353
01/18/96 08/23/96 AMSERV Healthcare Inc Pvd home health care services 9.2 7.895
01/23/96 05/09/96 Portage Industries Corp Manufacture plastic products 15.8 17.540
02/05/96 09/30/96 Customedix Corp Investment company 3.6 15.103
02/13/96 07/12/96 Medical Innovations Inc Pvd nursing care services 30.3 41.725
02/15/96 04/29/96 LDI Corp Bank hldg co; pvd finl svcs 28.1 288.893
02/28/96 07/11/96 Salton/Maxim Housewares Inc Mnfr personal care appliances 21.1 53.442
03/13/96 09/27/96 DeSoto Inc Manufacture steel wire 36.1 40.529
04/16/96 05/31/96 CIS Technologies Inc Pvd info, transaction svcs 99.3 112.471
04/22/96 06/04/96 Cornerstone Natural Gas Co Own, op oil and gas pipelines 96.6 97.614
05/03/96 03/17/98 Homeowners Group Inc Pvd homeowner membership svcs 11.4 14.968
05/06/96 09/03/96 Transcisco Industries Inc Mnfr transp equip,parts 44.7 51.126
05/07/96 09/03/96 NMR of America Inc Own,op diagnostic imaging ctrs 40.4 57.369
05/13/96 08/30/96 MDT Corp Mnfr sterilizing equipment 70.3 69.457
05/15/96 09/10/96 Carlisle Plastics Inc Mnfr fire protection systems 122.4 273.282
06/03/96 01/09/97 Bio-Dental Technologies Corp Mnfr,whl pharmaceuticals 40.3 48.477
06/10/96 07/22/96 SysteMed Inc Health insurance company 64.8 60.646
06/11/96 09/03/96 Computer Identics Corp Mnfr 2-D,3-D vision-based sys 42.0 40.881
06/17/96 10/07/96 Scanforms Inc Pvd advertising,marketing svcs 27.5 15.661
06/21/96 08/23/96 Computer Identics Corp Publish newsletters 12.0 11.548
06/24/96 12/05/96 MEM Co Inc Investor group 38.2 29.577
07/31/96 11/13/96 Calgene Inc Mnfr agro chems,manmade fibers 50.0 584.080
08/13/96 02/27/97 LaTex Resources Inc Oilo and gas exploration, prodn 27.1 44.759
09/10/96 01/03/97 GreenStone Industries Corp Mnfr lumber,plywood,pulp 29.2 40.823
09/11/96 03/04/97 Chempower Inc Pvd engineering services 50.0 36.189
09/16/96 12/06/96 Proler International Corp Manufacture steel products 42.5 68.146
09/26/96 01/24/97 General Physics Corp Mnfr contact lenses 261. 70.360
10/02/96 12/27/96 Software Publishing Corp Pvd software services 25.2 8.786
10/03/96 11/12/97 Pittencrieff Communications Pvd cellular telephone svcs 158.4 159.860
10/04/96 12/31/96 Pet Food Warehouse Inc Own and operate pet stores 60.7 55.986
10/30/96 12/20/96 Pacific Rehab & Sports Med Pvd nursing care services 72.7 75.706
11/05/96 03/14/97 Panatech Research &
Development Mnfr steel cutting tools 29.2 26.218
11/25/96 02/28/97 American Studios Inc Pvd photo processing services 66.3 67.650
12/06/96 03/18/97 MaxServ Inc (Sears Roebuck) Department stores; finl svcs 46.0 87.263
12/09/96 02/28/97 Houston Biotechnology Inc Manufacture pharmaceuticals 8.6 8.700
01/24/97 07/02/97 INCSTAR Corp (Sorin
Biomedical) Transportation, building prod 106.3 102.865
01/28/97 05/21/97 Calgene Inc (Monsanto Co) Mnfr agro chems, manmade fibers 242.6 567.548
01/30/97 08/12/97 AST Research Inc Mnfr consumer electronics 495.8 558.108
02/07/97 08/01/97 MS Financial (MS Diversified) Pvd business credit services 17.2 102.602
02/11/97 07/31/97 Serv-Tech Inc Provide waste management svcs 73.4 54.956
03/04/97 06/27/97 Audio King Corp Own, op radio, TV, electn stores 6.0 12.363
04/15/97 06/30/97 Kurzweil Applied Intelligence Mnfr speech tech products 51.3 50.852
04/30/97 07/25/97 Arden Industrial Products Inc Mnfr forged and machined parts 42.0 44.995
05/01/97 08/01/97 Cryenco Sciences Inc Mnfr process control instmnts 19.2 27.904
05/08/97 09/10/97 Imex Medical Systems Inc Investment company 9.3 10.238
06/16/97 09/30/97 Frederick's of Hollywood, Inc Investor group 69.4 57.007
06/24/97 07/25/97 Jillians Entertainment Corp Investment company 4.7 7.007
07/23/97 12/02/97 Rudy's Restaurant Group Own and operate restaurants 18.8 18.936
08/01/97 09/26/97 Community Care of America Inc Pvd specialty healthcare svcs 94.0 89.996
08/07/97 12/02/97 Magnetic Technologies Corp Mnfr industrial fasteners 16.8 15.984
08/14/97 12/31/97 Allied Capital Advisers Inc Closed-end mgmt investment co 49.5 44.111
09/02/97 12/03/97 Ground Round Restaurants Investment company 17.5 56.945
09/04/97 12/30/97 Cinergi Pictures Entertainment Investor group 16.3 59.794
09/26/97 09/26/97 Laclede Steel Co Manufacture steel, steel prod 15.0 131.767
10/10/97 01/07/98 Puro Water Group Inc Mnfr water treatment equip 25.7 30.186
10/13/97 03/19/98 Integrated Brands Inc Produce frozen yogurt 46.8 51.274
11/03/97 02/25/98 Individual Inc Pvd info retrieval svcs 86.8 79.390
11/04/97 01/12/98 ComputerVision Corp Develop, wholesale software 250.3 460.128
11/12/97 03/03/98 PureTec Corp Mnfr plastic 324.6 281.484
11/24/97 01/07/98 General Host Corp Investment bank 326.2 278.128
12/02/97 03/17/98 Staodyn Inc Mnfr electromedical equip 22.5 22.867
12/12/97 02/13/98 Impact Systems Inc Provide paper tech dvlp svcs 28.6 28.467
12/12/97 09/10/98 Timber Lodge Steakhouse Inc Own, op fast food restaurants 30.4 30.925
12/15/97 02/24/98 MetroGolf Inc Own and operate golf courses 6.6 18.428
12/22/97 05/20/98 Artistic Greetings Inc Provide marketing services 33.6 35.618
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Premium
----------------------------------------------------------------------------------
Date Date 1 Day Prior 1 Week Prior 4 Weeks Prior 3 Months Prior 1 Year Prior
Announced Effective Target Name to Annc. Date to Annc. Date to Annc. Date to Annc. Date to Annc. Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
01/10/96 06/26/96 American Resource Corp 30.77 23.50 27.03
01/18/96 08/23/96 AMSERV Healthcare Inc 14.56 27.29 20.59 -4.67 20.42
01/23/96 05/09/96 Portage Industries Corp 46.67 78.98 78.98 134.67 193.33
02/05/96 09/30/96 Customedix Corp 22.58 26.67 5.56 19.00 -18.98
02/13/96 07/12/96 Medical Innovations Inc 13.85 18.40 5.71 5.71 37.67
02/15/96 04/29/96 LDI Corp 31.20 21.48 49.09 26.15 5.81
02/28/96 07/11/96 Salton/Maxim Housewares Inc -0.19 12.84 3.81 1.65 -9.05
03/13/96 09/27/96 DeSoto Inc 65.41 53.00 80.00 118.57 53.00
04/16/96 05/31/96 CIS Technologies Inc 50.50 30.16 30.16 -5.57 33.78
04/22/96 06/04/96 Cornerstone Natural Gas Co 28.00 29.73 100.00 134.15 182.35
05/03/96 03/17/98 Homeowners Group Inc 22.07 26.77 93.88 135.43 17.71
05/06/96 09/03/96 Transcisco Industries Inc 15.56 36.84 28.40 57.58 271.43
05/07/96 09/03/96 NMR of America Inc 41.43 86.79 90.39 98.08 37.56
05/13/96 08/30/96 MDT Corp 12.82 22.22 4.76 15.79 -6.38
05/15/96 09/10/96 Carlisle Plastics Inc 38.20 38.20 41.83 73.94 31.51
06/03/96 01/09/97 Bio-Dental Technologies Corp 64.99 43.28 109.42 194.49 65.09
06/10/96 07/22/96 SysteMed Inc -4.00 4.35 9.09 -23.81 -56.36
06/11/96 09/03/96 Computer Identics Corp 63.11 54.53 54.53 72.71 19.84
06/17/96 10/07/96 Scanforms Inc 61.40 61.40 58.62 70.37 130.00
06/21/96 08/23/96 Computer Petroleum Corp 28.33 46.67 71.11 105.33 208.00
06/24/96 12/05/96 MEM Co Inc 13.21 81.82 90.48 93.55 114.29
07/31/96 11/13/96 Calgene Inc 64.10 80.28 39.13 31.96 14.29
08/13/96 02/27/97 LaTex Resources Inc 181.14 202.77 181.14 228.00 107.16
09/10/96 01/03/97 GreenStone Industries Corp 33.33 52.73 58.49 42.37 50.00
09/11/96 03/04/97 Chempower Inc 48.06 48.06 45.88 50.30 65.33
09/16/96 12/06/96 Proler International Corp 132.26 125.00 148.28 33.33 9.09
09/26/96 01/24/97 General Physics Corp 16.57 31.61 36.00 23.64 45.71
10/02/96 12/27/96 Software Publishing Corp 14.86 10.90 60.80 -88.09
10/03/96 11/12/97 Pittencrieff Communications 8.95 14.40 30.74 -13.08 29.14
10/04/96 12/31/96 Pet Food Warehouse Inc 22.93 26.00 48.24 48.24 57.50
10/30/96 12/20/96 Pacific Rehab & Sports Med 67.74 62.50 48.57 60.00 6.12
11/05/96 03/14/97 Panatech Research &
Development 55.56 55.56 51.35
11/25/96 02/28/97 American Studios Inc 90.48 110.53 166.67 -65.28 -73.33
12/06/96 03/18/97 MaxServ Inc (Sears Roebuck) 19.23 67.57 55.00 67.57 129.63
12/09/96 02/28/97 Houston Biotechnology Inc 52.00 62.13 52.00 -93.01 -92.05
01/24/97 07/02/97 INCSTAR Corp (Sorin
Biomedical) 42.93 53.21 68.53
01/28/97 05/21/97 Calgene Inc (Monsanto Co) 62.03 60.00 60.00 60.00 42.22
01/30/97 08/12/97 AST Research Inc 16.76 8.00 20.00 23.43 -31.43
02/07/97 08/01/97 MS Financial (MS Diversified) 20.00 46.67 10.00 1.54 -70.67
02/11/97 07/31/97 Serv-Tech Inc 32.00 60.00 88.57 129.57 12.34
03/04/97 06/27/97 Audio King Corp 60.00 68.00 68.00 68.00 -18.05
04/15/97 06/30/97 Kurzweil Applied Intelligence 83.83 69.69 66.49 84.00 63.56
04/30/97 07/25/97 Arden Industrial Products Inc 41.18 50.00 37.14 20.00 26.32
05/01/97 08/01/97 Cryenco Sciences Inc 69.23 76.00 72.55 41.94 -26.67
05/08/97 09/10/97 Imex Medical Systems Inc 7.90 2.76 2.76 -30.32 -32.50
06/16/97 09/30/97 Frederick's of Hollywood, Inc 48.85 44.47 25.95 93.75 85.07
06/24/97 07/25/97 Jillians Entertainment Corp 14.29 77.78 45.46 220.00 166.67
07/23/97 12/02/97 Rudy's Restaurant Group 50.94 70.21 72.04 60.00 5.26
08/01/97 09/26/97 Community Care of America Inc 23.08 18.52 88.24 68.42 -48.39
08/07/97 12/02/97 Magnetic Technologies Corp 25.00 25.00 33.33 42.86 33.33
08/14/97 12/31/97 Allied Capital Advisers Inc 10.41 4.68 10.41 8.97 -28.00
09/02/97 12/03/97 Ground Round Restaurants 10.00 10.00 -5.71 14.78 -34.00
09/04/97 12/30/97 Cinergi Pictures Entertainment 26.90 24.75 56.60 236.00 26.00
09/26/97 09/26/97 Laclede Steel Co 106.45 106.45 106.45 113.33 88.24
10/10/97 01/07/98 Puro Water Group Inc 33.95 47.69 44.00 44.00
10/13/97 03/19/98 Integrated Brands Inc 69.94 106.35 167.50 501.33 381.07
11/03/97 02/25/98 Individual Inc 0.92 14.93 -7.02 47.71 -6.00
11/04/97 01/12/98 ComputerVision Corp 28.31 69.92 18.63 14.33 -55.09
11/12/97 03/03/98 PureTec Corp 28.74 34.94 31.77 143.48 69.70
11/24/97 01/07/98 General Host Corp 60.00 62.96 79.59 51.72 77.69
12/02/97 03/17/98 Staodyn Inc 47.38 47.38 89.49 100.45 152.95
12/12/97 02/13/98 Impact Systems Inc 57.14 49.15 44.26 69.23 109.52
12/12/97 09/10/98 Timber Lodge Steakhouse Inc 74.13 74.13 81.19 94.32 139.43
12/15/97 02/24/98 MetroGolf Inc 20.00 20.00 -11.11 -25.00 -75.51
12/22/97 05/20/98 Artistic Greetings Inc 28.45 47.10 52.00 47.10 21.60
</TABLE>
Page F-10
<PAGE>
Merger Premiums to Market Value Analysis
Mergers with Target Price Equal to or Less than $5 per Share
Announced and Completed 1/1/96-10/9/98
(continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date Date
Announced Effective Target Name Target Business Description Acquiror Name
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
12/23/97 03/20/98 American Paging Inc Pvd wireless messaging svcs Telephone and Data Systems Inc
12/23/97 01/27/98 Hi-Lo Automotive Inc Own, op auto parts stores O'Reilly Automotive Inc
01/13/98 07/31/98 Bird Corp Manufacture building products CertainTeed Corp
01/16/98 02/26/98 Ophthalmic Imaging Systems Inc Mnfr, design, market imaging sys Premier Laser Systems
01/26/98 05/06/98 TransAmerican Waste Industries Pvd waste management services USA Waste Services Inc
02/09/98 06/18/98 American Waste Services Provide waste management svcs USA Waste Services Inc
02/23/98 06/26/98 CompScript Inc Pvd pharmaceutical mgmt svcs Omnicare Inc
03/02/98 04/30/98 First Alert Inc Mnfr fire and burglar alarms Sunbeam Corp
03/31/98 06/29/98 IBAH Inc Mnfr pharmaceutical products Omnicare Inc
04/09/98 07/29/98 Spec's Music Inc Record and video retail stores Camelot Music Holdings
04/10/98 06/26/98 Dataflex Corp Whl microcomputer equipment CompuCom Systems Inc (Safeguard)
04/22/98 06/29/98 AccelGraphics Inc Mnfr graphics accelerators Evans & Sutherland Computer
04/23/98 07/31/98 Morrison Restaurants Inc Own, operate eating places Piccadilly Cafeterias Inc
05/05/98 09/25/98 Allied Digital Technologies Co Mnfr multi media software prod Investor Group
05/07/98 07/31/98 Innovative Tech Systems Inc Dvlp facilities mgmt software Peregine Systems Inc
05/11/98 07/14/98 Micronics Computers Inc Mnfr system boards Diamond Multimedia Systems Inc
05/12/98 08/24/98 Virus Research Institute Inc Mnfr biological products T Cell Sciences Inc
05/20/98 09/15/98 InnoServ Technologies Pvd med equip repair svcs GE Medical Systems
05/22/98 07/22/98 Pete's Brewing Co Produce beer Gambinus Co.
05/29/98 08/17/98 Arch Petroleum Inc Oil, gas mining Pogo Producing Co
06/09/98 06/09/98 Lincoln Snack Co (Noel Group) Produce, whl pre-poped popcorn Brynwood Partners III LP
06/22/98 10/02/98 GT Bicycles Inc Manufacture, wholesale bicycles Schwinn Holdings Corp
07/07/98 09/21/98 Republic Engineered Steels Mnfr cold-finished steel prods Investor Group
07/14/98 09/18/98 DEP Corp Manufacture personal care prod Henkel KGaA
07/20/98 10/01/98 US SerVis Inc Dvp, design, whl software HBO & Co
07/29/98 09/11/98 E-Z Serve Corp Whl and retail gasoline EBC Texas Acquisition Corp
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Value of Enter-
Trans- prise
Date Date Acquiror action Value
Announced Effective Target Name Business Description ($ mil) ($ mil)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
12/23/97 03/20/98 American Paging Inc Pvd telecommunications svcs 9.1 217.941
12/23/97 01/27/98 Hi-Lo Automotive Inc Own, op auto supply stores 42.5 89.690
01/13/98 07/31/98 Bird Corp Mnfr asbestos, fiberglass prods 39.2 27.821
01/16/98 02/26/98 Ophthalmic Imaging Systems Inc Mnfr, whl laser sys alarms 1.3 7.006
01/26/98 05/06/98 TransAmerican Waste Industries Pvd waste disposal services 142.3 156.717
02/09/98 06/18/98 American Waste Services Pvd waste disposal services 122.1 106.919
02/23/98 06/26/98 CompScript Inc Whl, retail pharmaceuticals 68.4 68.415
03/02/98 04/30/98 First Alert Inc Mnfr, whl household appliances 129.2 171.213
03/31/98 06/29/98 IBAH Inc Whl, retail pharmaceuticals 154.3 153.807
04/09/98 07/29/98 Spec's Music Inc Own, op chain record stores 26.8 25.276
04/10/98 06/26/98 Dataflex Corp Manufacture computer equipment 25.2 46.850
04/22/98 06/29/98 AccelGraphics Inc Mnfr computer graphics system 55.9 36.284
04/23/98 07/31/98 Morrison Restaurants Inc Own and operate cafeterias 46.2
05/05/98 09/25/98 Allied Digital Technologies Co Investoer group 69.2 110.009
05/07/98 07/31/98 Innovative Tech Systems Inc Dvlp service desk software 75.7 72.285
05/11/98 07/14/98 Micronics Computers Inc Manufacture multimedia systems 31.7 12.967
05/12/98 08/24/98 Virus Research Institute Inc Mnfr vaccines, related products 62.6 60.225
05/20/98 09/15/98 InnoServ Technologies Mnfr diagnostic imaging equip 13.1 11.596
05/22/98 07/22/98 Pete's Brewing Co Produce, wholesale beer 69.4 51.299
05/29/98 08/17/98 Arch Petroleum Inc Oil and gas exploration, prodn 114.0 100.081
06/09/98 06/09/98 Lincoln Snack Co (Noel Group) Investment firm 7.1 8.981
06/22/98 10/02/98 GT Bicycles Inc Mnfr bicycles; holding company 149.6 170.494
07/07/98 09/21/98 Republic Engineered Steels Investor group 417.8 409.392
07/14/98 09/18/98 DEP Corp Mnfr, whl chemicals, detergents 89.7 90.606
07/20/98 10/01/98 US SerVis Inc Dvlp healthcare software 47.4 29.160
07/29/98 09/11/98 E-Z Serve Corp Investment firm 43.2 107.882
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Premium
----------------------------------------------------------------------------------
Date Date 1 Day Prior 1 Day Prior 4 Weeks Prior 3 Months Prior 1 Year Prior
Announced Effective Target Name to Annc. Date to Annc. Date to Annc. Date to Annc. Date to Annc. Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12/23/97 03/20/98 American Paging Inc 17.65 33.33 29.03 17.65 (47.37)
12/23/97 01/27/98 Hi-Lo Automotive Inc (14.07) 12.26 24.29 17.97 74.00
01/13/98 07/31/98 Bird Corp 25.71 18.92 29.41 37.50 (8.33)
01/16/98 02/26/98 Ophthalmic Imaging Systems Inc 16.67 27.27 40.00 75.00 (63.16)
01/26/98 05/06/98 TransAmerican Waste Industries 51.42 36.57 78.59 55.02 70.15
02/09/98 06/18/98 American Waste Services 100.00 156.00 166.67 166.67 77.78
02/23/98 06/26/98 CompScript Inc 26.56 67.24 52.70 80.10 (57.69)
03/02/98 04/30/98 First Alert Inc 68.00 90.91 110.00 104.88 71.43
03/31/98 06/29/98 IBAH Inc 12.20 61.40 58.62 53.33 (9.80)
04/09/98 07/29/98 Spec's Music Inc 30.37 65.00 65.00 340.00 230.00
04/10/98 06/26/98 Dataflex Corp 8.43 9.33 23.77 21.48 49.09
04/22/98 06/29/98 AccelGraphics Inc 13.58 22.67 21.05 62.83 (38.67)
04/23/98 07/31/98 Morrison Restaurants Inc 45.56 73.91 81.82 77.78 8.11
05/05/98 09/25/98 Allied Digital Technologies Co 14.29 14.29 37.93 86.05 158.06
05/07/98 07/31/98 Innovative Tech Systems Inc 8.04 10.88 25.78 62.15 301.52
05/11/98 07/14/98 Micronics Computers Inc 37.54 15.29 50.77 30.67 (16.60)
05/12/98 08/24/98 Virus Research Institute Inc 91.64 75.67 81.72 46.44 9.83
05/20/98 09/15/98 InnoServ Technologies 30.77 32.04 41.67 21.43 130.51
05/22/98 07/22/98 Pete's Brewing Co 6.25 39.73 42.66 45.83 6.33
05/29/98 08/17/98 Arch Petroleum Inc 0.13 5.47 (3.53) 4.00 (17.67)
06/09/98 06/09/98 Lincoln Snack Co (Noel Group) 6.67 3.23 3.23 42.22
06/22/98 10/02/98 GT Bicycles Inc 68.42 77.78 36.17 31.96 0.00
07/07/98 09/21/98 Republic Engineered Steels 56.76 68.12 45.00 87.10 427.27
07/14/98 09/18/98 DEP Corp 31.25 93.35 78.72 75.00 236.00
07/20/98 10/01/98 US SerVis Inc 151.62 85.98 151.62 289.09 256.67
07/29/98 09/11/98 E-Z Serve Corp 37.14 20.00 20.00 20.00 (20.00)
Mean: 39.7% 48.8% 55.4% 67.1% 53.8%
</TABLE>
Source: Securities Data Company, Inc; Three month and one-year premiums
calculated using security prices
from FactSet Research Systems, Inc. Commercial banks and other similar
financial institutions were excluded
for the purpose of this analysis.
Page F-3
<PAGE>
Merger Premiums to Market Value Analysis
Mergers with Target Price Between $5 and $10 per Share
Announced and Completed 1/1/96-10/9/98
(continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date Date
Announced Effective Target Name Target Business Description Acquiror Name
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
01/03/96 08/28/96 International Jensen Inc Mnfr radios and televisions Recoton Corp
01/08/96 05/31/96 Medalist Industries Inc Mnfr screws, bolts Illinois Tool Works Inc
01/11/96 07/30/96 Golf Enterprises Inc Own, op golf course, club, shop National Golf Properties Inc
01/16/96 02/26/96 Concord Health Group Pvd healthcare mgmt services Multicare Cos Inc
01/16/96 04/10/96 Orthopedic Technology Inc Manufacture surgical supplies Depuy Inc (Corange Ltd)
01/24/96 03/29/96 TGV Software Inc Develop software Cisco Systems Inc
01/29/96 04/08/96 Varitronic Systems Inc Mnfr typewriters WH Brady Co
02/08/96 07/31/96 Citizens Security Group Inc Insurance holding company Meridian Insurance Group
03/04/96 06/27/96 Storage Properties Inc Own and operate warehouses Public Storage Inc
03/13/96 04/18/96 CAPCO Automotive Products Corp Mnfr automobile parts Eaton Corp
04/03/96 06/17/96 E&B Marine Inc Ret, whl marine accessories West Marine Inc
04/15/96 11/22/96 Multi-Market Radio Inc Own, op radio broadcasting stns SFX Broadcasting Inc
04/22/96 07/18/96 Duplex Products Inc Manufacture business forms Reynolds & Reynolds Co
04/22/96 08/07/96 Ideon Group Inc Operate ret mail order house CUC International Inc
04/25/96 10/01/96 Sterling Chemicals Inc Mnfr commodity chemicals Investor Group
04/29/96 09/09/96 Crocker Realty Trust Inc REIT Highwoods Properties Inc
05/16/96 08/20/96 Professional Sports Care Mngmt Own, op physical therapy clinic HealthSouth Corp
05/20/96 08/29/96 Financing for Science Intl Inc Pvd business credit services Finova Group Inc
05/22/96 08/02/96 Network Express Inc Mnfr telecommunication equip Cabletron Systems Inc
05/24/96 09/04/96 Clinton Gas Systems Inc Oil and gas exploration, prodn Joint Energy Dven Investments
06/10/96 08/23/96 Bailey Corp Manufacture rubber products Venco Acquisition Corp
06/14/96 09/13/96 Bugaboo Creek Steak House Inc Own, op restaurants Longhorn Steaks Inc
06/21/96 09/26/96 Applied Bioscience Intl (IMS) Provide medical testing svcs Phamaceutical Product Dvlp
07/01/96 09/25/96 Brooktree Corp Manufacture semiconductors Rockwell International Corp
07/03/96 09/05/97 Golden Poultry Co Inc Produce, wholesale poultry Gold Kist Inc
07/11/96 10/11/96 Fay's Inc Own and operate drug stores Thrift Drug Inc (JC Penney Co)
07/12/96 10/10/96 ADCO Technologies Inc Mnfr adhesives and sealants Astor Chemicals
07/12/96 10/23/96 Supercuts Inc Operate barber shops Regis Corporation
07/19/96 08/30/96 FluoroScan Imaging Systems Mnfr, whl x-ray imaging device Hologic Designs
08/02/96 11/07/96 Colonial Data Technologies Manufacture telcommun equip US Order Inc
08/26/96 12/20/96 Home Shopping Network (Liberty) Own. op TV broadcasting statn Silver King Communications Inc
09/09/96 09/23/96 Crooker realty Trust Inc REIT Highwoods Properties Inc
09/10/96 12/05/96 Acquitron Medical Inc Manufacture apnca monitors Nellcor Puritan-Bennett
09/11/96 12/02/96 ReadiCare Inc Own and operate HMO's HealthSouth Corp
09/16/96 11/07/97 Centerior Energy Corp Electric utility holding co Ohio Edison Co
09/24/96 01/02/97 Datalogix International Develop business software Oracle Corp
10/01/96 04/25/97 Cosmetic Center Inc Operate cosmetic stores Prestige Fragance & Cosmetics
10/10/96 02/12/97 Knogo North America Inc Mnfr search, navigation equip Video Sentry Corp
10/10/96 11/27/96 WCI Steel Inc (Renco Group Inc) Manufacture steel Renco Group Inc
10/17/96 02/27/97 Triad Systems Corp Develop turnkey computer sys Investor Group
11/06/96 03/07/97 Midland Financial Group Inc Fire, marine, casualty ins co Progressive Corp
11/06/96 12/11 96 Union Switch & Signal Inc Manufacture railroad equip Ansaldo Transporti SpA
11/11/96 03/17/97 AHI Healthcare Systems Inc Pvd physician contracting svcs FPA Medical Management Inc
11/13/96 12/17/96 Edmark Corp Develop educational software IBM Corp
11/18/96 03/27/97 Tyco Toys Inc Manufacture and wholesale toys Mattel Inc
12/10/96 04/01/97 Softdesk Inc Develop, wholesale CAD software Autodesk Inc
12/23/96 05/09/97 StarSight Telecast Inc Pvd cable programming svcs Gemstar International Group
12/26/96 04/16/97 Royce Laboratories Inc Mnfr pharmaceuticals products Watson Pharmaceuticals Inc
01/17/97 04/24/97 American Recreation Centers Own, op bowling, rec centers AMF Bowling Centers (AMF Group)
01/27/97 07/24/97 Cardiometrics Inc Mnfr surgical, medical equip EndoSonics Corp
02/11/97 05/29/97 Fractal Design Corp Develop graphics software MetaTools Inc
02/11/97 03/24/97 Innotech Inc Mnfr electro-medical prods Johnson & Johnson
02/18/97 07/01/98 Contour Medical (Retirement) Mnfr surgical supplies Sun Healthcare Group Inc
02/18/97 07/01/98 Retirement Care Associates Inc Own, operate nursing homes Sun Healthcare Group Inc
03/06/97 07/31/97 Allwaste Inc Pvd asbestos treatment svcs Philip Environmental Inc
03/06/97 08/13/97 Crop Growers Corp Insurance agency Fireman's Fund Insurance Co
03/11/97 04/15/97 TPC Corp Pvd gas transmission svcs PacifiCorp Holdings Inc
03/21/97 06/12/97 CrossComm Corp Mnfr computer networking equip Olicom A/S
03/27/97 03/27/97 Strober Organization Inc Wholesale building materials Hamilton Acquisition LLC
03/31/97 06/03/97 Peak Technologies Group Inc Whl integrated systems Moore Corp Ltd
04/10/97 06/13/97 ERO Inc Manufacture toys Hedstrom Corp (Hedstrom Hldgs)
04/10/97 06/26/97 Microcom Inc Mnfr data comm products Company Computer Corp
04/18/97 07/10/97 LIVE Entertainment Inc Whl, retail recorded music Investor Group
05/30/97 07/09/97 Integrated Living Communities Pvd nursing, personal care svcs Whitehall Street Real Estate
05/30/97 10/16/97 National Picture and Frame Co Mnfr picture, mirror frames Colonnade Capital LLC
06/03/97 09/08/97 Physician Corp of America Own and operate HMO's Humana Inc
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Value of Enter-
Trans- prise
Date Date Acquiror action Value
Announced Effective Target Name Business Description ($ mil) ($ mil)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
01/03/96 08/28/96 International Jensen Inc Mnfr audio, video equipment 109.1 109.595
01/08/96 05/31/96 Medalist Industries Inc Mnfr indl fasteners, tools 55.4 91.567
01/11/96 07/30/96 Golf Enterprises Inc Real estate investment trust 82.9 141.614
10/16/96 02/26/96 Concord Health Group Own, op nursing care facilities 126.9 126.755
01/16/96 04/10/96 Orthopedic Technology Inc Mnfr orthopedic devices 45.2 44.871
01/24/96 03/29/96 TGV Software Inc Mnfr inter-networking systems 92.4 71.54
01/29/96 04/08/96 Varitronic Systems Inc Mnfr indl labeling machines 42.5 43.333
02/08/96 07/31/96 Citizens Security Group Inc Insurance holding company 22.6 26.703
03/04/96 06/27/96 Storage Properties Inc Real estate investment trust 22.8 1,293.505
03/13/86 04/18/96 CAPCO Automotive Products Corp Manufacture automotive parts 128.9 140.935
04/03/96 06/17/96 E&B Marine Inc Own, op boat dealerships 30.6 49.597
04/15/96 11/22/96 Multi-Market Radio Inc Own, op radio bdcstg stations 104.4 89.166
04/22/95 07/18/96 Duplex Products Inc Pvd comp sys bus forms svcs 90.1 85.54
04/22/96 08/07/96 Ideon Group Inc Provide discount club svcs 381.8 382.225
04/25/96 10/01/96 Sterling Chemicals Inc Investor group 798.4 791.162
04/29/96 09/09/96 Crocker Realty Trust Inc Real estate investment trust 537.5 531.94
05/16/96 08/20/96 Professional Sports Care Mngmt Own, op outpatient surgery ctr 64.8 54.952
05/20/96 08/29/96 Financing for Science Inl Inc Pvd financial services 39.2 193.919
05/22/95 08/02/96 Network express Inc Mnfr, whl, install LAN, WAN 118.4 112.039
05/24/96 09/04/96 Clinton Gas Systems Inc Investment firm 38.4 52.887
06/10/96 08/23/96 Bailey Corp Investment holding company 47.8 106.359
06/14/96 09/13/96 Bugaboo Creek Steak House Inc own and operate steakhouses 48.5 55.641
06/21/96 09/26/96 Applied Bioscience Inc (IMS) Pvd comm phy research svcs 491.5 483.418
07/01/96 09/25/96 Brooktree Corp Mnfr aircraft defense systems 261.8 273.377
07/03/96 09/05/97 Golden Poultry Co Inc Produce, wholesale poultry 52.1 209.708
07/11/96 10/11/96 Fay's Inc Own and operate drug stores 277.9 352.368
07/12/96 10/10/96 ADCO Technologies Inc Mnfr specialty chemicals 53.8 54.141
07/12/96 10/23/96 Supercuts Inc Operate hairstyling salons 175.1 174.379
07/19/96 08/30/96 FluoroScan Imaging Systems Mnfr and whl X-ray systems 59.1 53.882
08/02/96 11/07/96 Colonial data Technologies Pvd equip rental, leasing svcs 186.5 176.021
08/26/96 12/20/96 Home Shopping Network (Liberty) Operate television stations 1,216.9 1,069.458
09/09/96 09/23/96 Crooker realty Trust Inc Real estate investment trust 76.1 557.561
09/10/96 12.05/96 Acquitron Medical Inc Mnfr electn patient monitors 56.6 56.176
09/11/96 12/02/96 ReadiCare Inc Own, op outpatient surgery ctr 73.9 70.736
09/16/96 11/07/97 Centerior Energy Corp Electric utility 1,612.6 6,202.925
09/24/96 01/02/97 Datalogix International Develop database software 80.0 63.045
10/01/96 04/25/97 Cosmetic Center Inc Own and op retail stores 32.8 30.68
10/10/96 02/12/97 Knogo North America Inc Provide electrical services 48.8 45.572
10/10/96 11/27/96 WCI Stell Inc (Renco Group Inc) Mnfr steel products 56.5 437.182
10/17/96 02/27/97 Triad Systems Corp Investor group 193.1 225.973
11/06/96 03/07/97 Midland Financial Group Inc Insurance holding company 47.2 72.692
11/06/96 12/11 96 Union Switch & Signal Inc Mnfr train and transp equip 27.1 135.632
11/13/96 03/17/97 All Healthcare Systems Inc Pvd health care mgmt services 117.0 103.179
11/13/96 12/17/96 Edmark Corp Mnfr computers, office equip 123.8 81.322
11/18/96 03/27/97 Tyco Toys Inc Mnfr, whl games, toys 737.4 1,073.147
12/10/96 04/01/97 Softdesk Inc Design drafting software 91.7 88.442
12/23/96 05/05/97 StarSight Telecast Inc Mnfr simplified VCR programmer 273.1 266.569
12/26/96 04/16/97 Royce Laboratories Inc Mnfr pharmaceutical products 84.2 81.639
01/17/96 04/24/97 American Recreation Centers Own, op bowling centers 70.7 63.83
01/27/97 07/24/97 Cardiometrics Inc Mnfr image processing equip 56.8 37.872
02/11/97 05/29/97 Fractal Design Corp Develop software 140.2 136.069
02/11/97 03/24/97 Innotech Inc Mnfr medical equip and prods 135.6 116.561
02/18/97 07/01/98 Contour Medical (Retirement) Pvd long-term healthcare svcs 55.2 72.823
02/18/97 07/01/98 Retirement Care Associates Inc Pvd long-term healthcare svcs 305.9 292.435
03/06/97 07/03/97 Allwaste Inc Provide waste management svcs 506.7 534.883
03/06/97 08/13/97 Crop Growers Corp Insurance company 82.1 89.061
03/11/97 04/15/97 TPC Corp Pvd telephone commun services 408.5 398.392
03/21/97 06/12/97 CrossComm Corp Mnfr communications equipment 84.6 77.829
03/27/97 03/27/97 Strober Organization Inc Investment company 33.4 30.937
03/03/97 06/03/97 Peak Technologies Group Inc Mnfr manifold business forms 169.8 192.09
04/10/97 06/13/97 ERO Inc Manufacture games and toys 203.6 201.739
04/10/97 06/26/97 Microcom Inc Manufacture personal computers 267.6 273.087
04/18/97 07/10/97 LIVe Entertainment Inc Investor group 53.1 98.981
05/30/97 07/09/97 Integrated Living Communities Real estate development finn 79.7 78.553
05/30/97 10/16/97 National Picture and Frame Co Private equity firm 60.3 67.073
06/03/97 09/08/97 Physician Corp of America Own and operate HMO's 405.1 260.352
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Premium
----------------------------------------------------------------------------------
Date Date 1 Day Prior 1 Day Prior 4 Weeks Prior 3 Months Prior 1 Year Prior
Announced Effective Target Name to Annc. Date to Annc. Date to Annc. Date to Annc. Date to Annc. Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
01/03/96 08/28/96 International Jensen Inc 29.41 57.14 49.15 46.67 12.82
01/08/96 05/31/96 Medalist Industries Inc 127.20 136.67 110.37 (43.20) (43.20)
01/11/96 07/30/96 Golf Enterprises Inc 37.14 45.46 45.46 (7.69) 6.67
10/16/96 02/26/96 Concord Health Group 25.11 43.42 58.92 50.77 40.00
01/16/96 04/10/96 Orthopedic Technology Inc 26.45 43.89 49.03
01/24/96 03/29/96 TGV Software Inc 41.55 70.63 73.00 73.00
01/29/96 04/08/96 Varitronic Systems Inc 79.49 79.49 62.79 94.44 89.19
02/08/96 07/31/96 Citizens Security Group Inc 88.68 108.33 117.39 25.00 25.00
03/04/96 06/27/96 Storage Properties Inc 10.94 16.44 15.29 (58.88) (50.59)
03/13/86 04/18/96 CAPCO Automotive Products Corp 66.67 72.41 78.57 24.22 (13.04)
04/03/96 06/17/96 E&B Marine Inc (4.76) 20.00 7.14 100.00 3.45
04/15/96 11/22/96 Multi-Market Radio Inc 11.11 29.87 19.05 28.21 56.25
04/22/95 07/18/96 Duplex Products Inc 1.05 28.86 36.17 48.84 41.18
04/22/96 08/07/96 Ideon Group Inc 38.46 54.29 36.71 38.46 (22.30)
04/25/96 10/01/96 Sterling Chemicals Inc 29.73 47.69 47.69 29.73 (7.69)
04/29/96 09/09/96 Crocker Realty Trust Inc 10.20 11.60 13.03 24.17
05/16/96 08/20/96 Professional Sports Care Mngmt 13.74 29.05 34.21 620.95 (36.92)
05/20/96 08/29/96 Financing for Science Inl Inc 4.49 6.67 12.53 17.70 108.98
05/22/95 08/02/96 Network express Inc (10.64) 19.97 39.01 119.00 (20.36)
05/24/96 09/04/96 Clinton Gas Systems Inc 3.85 14.89 31.71 12.50 80.00
06/10/96 08/23/96 Bailey Corp 5.46 6.06 11.11 55.56 68.67
06/14/96 09/13/96 Bugaboo Creek Steak House Inc 9.19 16.02 10.82 (60.93) (30.62)
06/21/96 09/26/96 Applied Bioscience Inc (IMS) 75.34 82.86 77.78 77.78 204.76
07/01/96 09/25/96 Brooktree Corp 42.86 64.38 16.51 71.43 (13.04)
07/03/96 09/05/97 Golden Poultry Co Inc 52.00 50.00 39.02 29.55 142.55
07/11/96 10/11/96 Fay's Inc 27.50 61.91 61.91 82.14 72.88
07/12/96 10/10/96 ADCO Technologies Inc 28.13 51.85 57.69 368.57 105.00
07/12/96 10/23/96 Supercuts Inc 55.29 53.04 60.00 99.25 50.86
07/19/96 08/30/96 FluoroScan Imaging Systems 116.00 109.35 70.10 134.62 131.63
08/02/96 11/07/96 Colonial data Technologies 20.00 33.33 (6.80) (45.86) 13.68
08/26/96 12/20/96 Home Shopping Network (Liberty) 38.95 62.46 62.46 (6.55) 27.23
09/09/96 09/23/96 Crooker realty Trust Inc 18.80 20.30 21.85 5.02 58.40
09/10/96 12.05/96 Acquitron Medical Inc 18.06 21.53 40.07 23.34 22.43
09/11/96 12/02/96 ReadiCare Inc 66.79 55.42 55.42 66.83 120.65
09/16/96 11/07/97 Centerior Energy Corp 42.82 40.52 42.82 50.21 2.49
09/24/96 01/02/97 Datalogix International 28.00 42.22 56.10 14.19 (55.24)
10/01/96 04/25/97 Cosmetic Center Inc 17.39 45.33 103.47 64.97 (3.11)
10/10/96 02/12/97 Knogo North America Inc (3.38) 13.31 7.45
10/10/96 11/27/96 WCI Steel Inc (Renco Group Inc) 17.65 29.03 77.78 90.48 105.13
10/17/96 02/27/97 Triad Systems Corp 68.18 60.87 89.74 72.09 68.18
11/06/96 03/07/97 Midland Financial Group Inc 30.91 24.14 0 (2.70) (5.26)
11/06/96 12/11 96 Union Switch & Signal Inc 3.57 3.57 0 (6.45) 9.43
11/11/96 03/17/97 AHI Healthcare Systems Inc 10.90 34.00 23.69 34.00 (34.37)
11/13/96 12/17/96 Edmark Corp 35.52 63.16 31.92 5.08 (61.73)
11/18/96 03/27/97 Tyco Toys Inc 73.69 80.12 94.53 (33.82) (26.30)
12/10/96 04/01/97 Softdesk Inc 60.00 66.76 146.67 111.43 (32.73)
12/23/96 05/09/97 StarSight Telecast Inc 17.86 20.84 44.28 16.22 94.60
12/26/96 04/16/97 Royce Laboratories Inc 0.57 22.91 18.52 30.95 (36.21)
01/17/96 04/24/97 American Recreation Centers 15.25 33.33 70.00 58.14 33.33
01/27/97 07/24/97 Cardiometrics Inc 18.28 13.81 47.12 82.79 2.24
02/11/97 05/29/97 Fractal Design Corp 44.97 40.44 0.99 (6.82) (18.25)
02/11/97 03/24/97 Innotech Inc 54.93 64.18 54.93 400.00 (50.95)
02/18/97 07/01/98 Contour Medical (Retirement) 21.43 47.83 58.14
02/18/97 07/01/98 Retirement Care Associates Inc 19.44 14.67 21.13 91.11 3.79
03/06/97 07/03/97 Allwaste Inc 48.22 63.35 95.22 122.44 128.80
03/06/97 08/13/97 Crop Growers Corp 20.59 15.49 41.38 57.69 (2.38)
03/11/97 04/15/97 TPC Corp 52.17 65.05 55.48 652.84 946.63
03/21/97 06/12/97 CrossComm Corp 74.32 70.17 70.17 70.10 (9.57)
03/27/97 03/27/97 Strober Organization Inc 0 3.23 2.13 4.35 37.14
03/03/97 06/03/97 Peak Technologies Group Inc 108.70 97.26 65.52 50.00 (1.37)
04/10/97 06/13/97 ERO Inc 12.50 16.88 30.44 47.54 73.08
04/10/97 06/26/97 Microcom Inc 54.76 91.18 35.42 35.42 (43.48)
04/18/97 07/10/97 LIVE Entertainment Inc 6.67 6.67 50.00
05/30/97 07/09/97 Integrated Living Communities 26.90 21.05 50.82 73.58
05/30/97 10/16/97 National Picture and Frame Co 31.51 28.00 28.00 22.29 18.52
06/03/97 09/08/97 Physician Corp of America 12.00 12.00 23.08 65.93 (45.63)
</TABLE>
Page F-4
<PAGE>
Merger Premiums to Market Value Analysis
Mergers with Target Price Between $5 and $10 per Share
Announced and Completed 1/1/96-10/9/98
(continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date Date
Announced Effective Target Name Target Business Description Acquiror Name
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
06/05/97 07/14/97 DIGEX Inc Develop Internet software Intermedia Communicaitons Inc
06/20/97 10/23/97 Convest Energy Corp Oil and gas exploration, prodn Forcenergy Inc
07/02/97 10/28/97 Calnetics Corp Manufacture plastic products Summa Industries Inc
07/03/97 09/26/97 Krystal Co Own, op fast food restaurants Port Royal Holdings Inc
07/10/97 11/18/97 Airways Corp Passenger airline AirTran Holdings Inc
07/14/97 10/28/97 Katz Media Group Advertising agency Investor Group
07/24/97 10/28/97 Astrotech International Corp Pvd storage tank maintenance ITEQ Inc
07/25/97 12/01/97 Homegate Hospitality Inc Own and operate hotels Prime Hospitality Corp
07/25/97 08/28/97 Imo Industries Inc Mnfr industrial controls, pumps Constellation Capital Partners
07/31/97 09/29/97 Interactive Group Inc Dvlp, whl comp integrated sys DataWorks Corp
08/04/97 12/31/97 Belmont Homes Inc Mnfr prefabricated Houses Cavalier Homes Inc
08/04/97 11/19/97 Gyncare Inc Pvd biotech prod dvlp services Johnson & Johnson
08/14/97 12/18/97 Technology Service Group Inc. Mnfr cellular telephones Elcotel
08/25/97 10/03/97 BioWhitaker Inc Mnfr, whl medical testing prods Cambrex Corp
08/25/97 01/23/98 PerSeptive Biosystems Inc Mnfr chromatography equipment Perkin-Elmer Corp
09/17/97 12/12/97 Designer Holdings (New Rio LLC) Dvlp, mkt designer sportswear Warnaco Group Inc
09/23/97 01/22/98 El Chico Restaurants Inc Own and operate restaurants Investor Group
09/26/97 02/03/98 Sagebrush Inc Own and operate eating places WSMP Inc
09/26/97 04/28/98 Skyline Chili Inc Operate, franchise restaurants Investor Group
09/29/97 11/26/97 CompuRAD Inc Pvd Healthcare software Lumisys Inc
10/01/97 12/05/97 Alpine Lace Brands Inc Whl dairy products, cheese LandO'Lakes Inc
10/15/97 11/21/97 Thompson PBE Inc Whl automotive paint, supplies FinishMaster Inc (Lacey Distn)
10/20/97 01/29/98 Cruise America Inc Own, op trailer dealership Budget Group Inc
11/07/97 05/28/98 Medicus Systems Corp Develop, whl medical software QuadraMed Corp
11/17/97 03/10/98 Shared Technologies Fairchild Mnfr telecommunications equip Intermedia Communications Inc
11/17/97 03/02/98 Visigenie Software Inc Dvlp database access software Borland International Inc
11/21/97 01/20/98 New Jersey Steel (Von Roll) Mnfr steel reinforcing bars Co-Steel Inc
11/24/97 02/03/98 Communicaitons Central Inc Pvd telecommunications svcs Davel Communications Inc
12/19/97 06/03/98 Eclipse Telecommunicaitons Inc Pvd radiotelecommunication svc IXC Communications Inc
12/29/97 03/17/98 Heartstream Inc Mnfr defibrillators Hewlett-Packard Co
01/06/98 03/02/98 DBA Systems Inc Dvlp digital imaging systems Titan Corp
01/14/98 06/02/98 Meridian Point Realty Trust Real estate investment trust EastGroup Properties
01/15/98 06/11/98 OHM Corp Operate hazardous waste sites International Technology Corp
01/16/98 02/25/98 Checkmate Electronics Inc Mnfr, whl payment systems International Verifact Inc
01/21/98 05/15/98 BKC Semiconductors Inc Mnfr semiconductor devices Microsemi Corp
01/22/98 09/29/98 BT Office Products Intl Inc Whl office stationary, supples Buhrmann NV
01/28/98 03/05/98 Sun Coast Industries Inc Mnfr plastic products Kerr Group Inc
01/29/98 06/05/98 Monroe Inc Mnfr, whl concrete, sand, gravel US Aggregates Inc
01/29/98 05/21/98 ProSource Inc (Onex Corp) Wholesale groceries AmeriServe Food Distribution
02/04/98 06/09/98 TresCom International Inc Pvd communicaitons svcs Primus Telecommunications
02/10/98 06/30/98 Ryan Beck & Co, Livingston, NJ Securities brokerage firm BankAtlantic Bancorp, Florida
02/17/98 08/17/98 Bell Sports Corp Mnfr bicycle equip, accessories HB Acquisition Corp
02/24/98 05/04/98 Somatogen Inc Dvlp human blood substitutes Baxter International Inc
03/02/98 04/30/98 Signature Brands USA Inc Mnfr, whl consumer housewares Sunbean Corp
03/05/98 05/20/98 Intelligent Electronics Inc Whl, ret computer systems Xerox Corp
03/06/98 04/30/98 Proxima Corp Mnfr PC liq crys display prods ASK AS
03/10/98 06/19/98 Corcom Inc Manufacture radio filters Communications Instruments Inc
03/16/98 07/10/98 International Murex Tech Corp Mnfr in-vitro test systems Abbott Laboratories
04/03/98 07/21/98 Bertucci's Inc Own and operate restaurants NE Restaurant Co Inc
04/15/98 05/29/98 Simulation Sciences Inc Dvlp simulation software Siche PLC
04/28/98 07/20/98 Hein-Werner Corp Mnfr automotive service equip Snap-On Inc
04/29/98 09/25/98 Group I Software Inc Develop software COMNET Corp
05/04/98 06/10/98 Farah Inc Mnfr, ret family apparel Tropical Sportswear Intl Corp
05/07/98 06/30/98 InTime Systems International Pvd systems integration svcs Aris Corp
05/29/98 08/06/98 Mid-America Realty Investments Real estate investment trust Bradley Real Estate Inc
06/01/98 08/28/98 PST Vans Inc Trucking company US Xpress Enterprises Inc
06/11/98 07/02/98 Imo Industries Inc Mnfr industrial controls, pumps Constellation Capital Partners
07/28/98 09/10/98 CyberMedia Inc Dvlp, whl support software prod Network Associates Inc
09/14/98 09/14/98 Icon CMT Corp Pvd Internet computer svcs Qwest Commun Int Inc
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Value of Enter-
Trans- prise
Date Date Acquiror action Value
Announced Effective Target Name Business Description ($ mil) ($ mil)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
06/05/97 07/14/97 DIGEX Inc Pvd telecommunications svcs 171.6 166.838
06/20/97 10/23/97 Convest Energy Corp Oil, gas exploration and prodn 102.0 101.521
07/02/97 10/28/97 Calnetics Corp Mnfr plastic conveyor parts 23.4 26.363
07/03/97 09/26/97 Krystal Co Investment company 145.4 145.677
07/10/97 11/18/97 Airways Corp Passenger airline 63.7 75.936
07/14/97 10/28/97 Katz Media Group Investor group 371.9 362.128
07/24/97 10/28/97 Astrotech International Corp Prvd, treatment for liqds, gas 116.7 147.176
07/25/97 12/01/97 Homegate Hospitality Inc Own, operate, franchise hotels 133.2 123.069
07/25/97 08/28/97 Imo Industries Inc Investment company 117.3 430.169
07/31/97 09/29/97 Interactive Group Inc Dvlp computer integrated sys 55.0 59.004
08/04/97 12/31/97 Belmont Homes Inc Manufacture mobile homes 74.0 68.986
08/04/97 11/19/97 Gyncare Inc Mnfr medical equip and prods 70.5 65.68
08/14/97 12/18/97 Technology Service Group Inc. Mnfr public commun products 32.9 35.485
08/25/97 10/03/97 BioWhitaker Inc Mnfr specialty chemicals 130.5 130.017
08/25/97 01/23/98 PerSeptive Biosystems Inc Mnfr analytical instruments 288.1 339.306
09/17/97 12/12/97 Designer Holdings (New Rio LLC) Mnfr women's intimate apparel 353.6 290.492
09/23/97 01/22/98 El Chico Restaurants Inc Investor group 49.2 58.65
09/26/97 02/03/98 Sagebrush Inc Produce prepared sandwiches 39.4 41.395
09/26/97 04/28/98 Skyline Chili Inc Investor group 22.9 26.661
09/29/97 11/26/97 CompuRAD Inc Mnfr medical imaging equipment 25.0 23.321
10/01/97 12/05/97 Alpine Lace Brands Inc Produce butter, milk and meats 48.4 59.309
10/15/97 11/21/97 Thompson PBE Inc Whl automotive paint, coatings 69.3 116.683
10/20/97 01/29/98 Cruise America Inc Pvd passenger car rental svcs 59.3 144.263
11/07/97 05/28/98 Medicus Systems Corp Pvd info sys for healthcare 23.3 46.93
11/17/97 03/10/98 Shared Technologies Fairchild Pvd telecommunications svcs 503.6 585.377
11/17/97 03/02/98 Visigenie Software Inc Develop software 148.4 130.467
11/21/97 01/20/98 New Jersey Steel (Von Roll) Mnfr steel and steel products 173.5 176.789
11/24/97 02/03/98 Communicaitons Central Inc Pvd pay telephone commun svcs 102.4 133.097
12/19/97 06/03/98 Eclipse Telecommunicaitons Inc Pvd long distance tele svcs 122.2 122.055
12/29/97 03/17/98 Heartstream Inc Mnfr computers, testing equip 130.6 110.93
01/06/98 03/02/98 DBA Systems Inc Pvd computer sys design svcs 37.9 28.993
01/14/98 06/02/98 Meridian Point Realty Trust Real estate investment trust 51.7 45.053
01/15/98 06/11/98 OHM Corp Pollution control engineering 326.8 343.15
01/16/98 02/25/98 Checkmate Electronics Inc Mnfr, whl electn payment sys 47.2 46.947
01/21/98 05/15/98 BKC Semiconductors Inc Mnfr semi-conductor products 13.3 15.905
01/22/98 09/29/98 BT Office Products Intl Inc Mnfr folding paperboard boxes 138.1 689.726
01/28/98 03/05/98 Sun Coast Industries Inc Mnfr plastic packaging prods 45.5 63.493
01/29/98 06/05/98 Monroe Inc Manufacture building products 50.3 60.961
01/29/98 05/21/98 ProSource Inc (Onex Corp) Wholesale packaged frozed food 343.3 293.91
02/04/98 06/09/98 TresCom International Inc Pvd telecommunications svcs 134.7 142.626
02/10/98 06/30/98 Ryan Beck & Co, Livingston, NJ Savings and loan 35.9 36.324
02/17/98 08/17/98 Bell Sports Corp Investment firm 165.7 228.365
02/24/98 05/04/98 Somatogen Inc Mnfr health care products 232.9 175.471
03/02/98 04/30/98 Signature Brands USA Inc Mnfr, whl household appliances 81.7 246.68
03/05/98 05/20/98 Intelligent Electronics Inc Mnfr business machine, fin co 341.6 298.084
03/06/98 04/30/98 Proxima Corp Mnfr liquid crystal displays 82.9 70.022
03/10/98 06/19/98 Corcom Inc Mnfr, whl relay systems 51.7 44.47
03/16/98 07/10/98 International Murex Tech Corp Mnfr pharmaceuticals, med equip 232.7 126.361
04/03/98 07/21/98 Bertucci's Inc Own, operate restaurants 96.5 104.175
04/15/98 05/29/98 Simulation Sciences Inc Mnfr aappliance controls 146.5 100.093
04/28/98 07/20/98 Hein-Werner Corp Manufacture tools 37.5 32.296
04/29/98 09/25/98 Group I Software Inc Pvd dat processing svcs 11.8 64.592
05/04/98 06/10/98 Farah Inc Mnfr, whl mens sportswear 93.6 144.521
05/07/98 06/30/98 InTime Systems International Pvd computer related services 44.9 39.672
05/29/98 08/06/98 Mid-America Realty Investments Real estate investment trust 153.2 148.756
06/01/98 08/28/98 PST Vans Inc Trucking company 83.9 88.376
06/11/98 07/02/98 Imo Industries Inc Investment company 9.1
07/28/98 09/10/98 CyberMedia Inc Develop network software 130.1 108.15
09/14/98 09/14/98 Icon CMT Corp Pvd telephone commun svcs 190.6 171.891
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Premium
----------------------------------------------------------------------------------
Date Date 1 Day Prior 1 Day Prior 4 Weeks Prior 3 Months Prior 1 Year Prior
Announced Effective Target Name to Annc. Date to Annc. Date to Annc. Date to Annc. Date to Annc. Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
06/05/97 07/14/97 DIGEX Inc 19.54 35.95 31.65 20.93
06/20/97 10/23/97 Convest Energy Corp 11.06 11.06 18.93 84.20 89.99
07/02/97 10/28/97 Calnetics Corp 30.67 33.64 25.11 20.00 (13.53)
07/03/97 09/26/97 Krystal Co 132.00 169.77 176.19 169.77 182.93
07/10/97 11/18/97 Airways Corp 26.74 29.76 32.93 (7.66) (39.47)
07/14/97 10/28/97 Katz Media Group 44.26 69.23 93.41 225.93 120.00
07/24/97 10/28/97 Astrotech International Corp 45.70 63.40 78.41 96.49 149.83
07/25/97 12/01/97 Homegate Hospitality Inc 30.25 33.77 28.56 83.26
07/25/97 08/28/97 Imo Industries Inc 18.74 20.00 22.61 116.92 44.62
07/31/97 09/29/97 Interactive Group Inc 54.40 44.75 71.56 137.54 131.60
08/04/97 12/31/97 Belmont Homes Inc (17.90) 0.65 9.47 2.30 (42.22)
08/04/97 11/19/97 Gyncare Inc (2.82) 1.66 37.67 37.67 73.89
08/14/97 12/18/97 Technology Service Group Inc. (4.55) 7.14 41.89 23.48 (34.40)
08/25/97 10/03/97 BioWhitaker Inc 17.77 38.87 47.68 8.19 63.23
08/25/97 01/23/98 PerSeptive Biosystems Inc 16.80 24.88 50.42 92.78 68.27
09/17/97 12/12/97 Designer Holdings (New Rio LLC) 17.28 50.36 58.49 7.32 (51.65)
09/23/97 01/22/98 Il Chico Restaurants Inc 64.52 75.86 104.00 39.73 54.55
09/26/97 02/03/98 Sagebrush Inc 15.87 13.38 21.20
09/26/97 04/28/98 Skyline Chili Inc 0 1.89 5.88 8.00 18.68
09/29/97 11/26/97 CompuRAD Inc 1.32 3.43 1.32 3.50 (4.46)
10/01/97 12/05/97 Alpine Lace Brands Inc 15.87 48.98 46.00 60.53 43.22
10/15/97 11/21/97 Thompson PBE Inc 25.49 33.33 42.22 45.45 10.34
10/20/97 01/29/98 Cruise America Inc 17.95 13.70 39.87 36.28 64.67
11/07/97 05/28/98 Medicus Systems Corp 36.36 39.54 25.00 87.50 50.00
11/17/97 03/10/98 Shared Technologies Fairchild 66.67 106.90 163.74
11/17/97 03/02/98 Visigenie Software Inc 92.00 64.00 92.00 19.27 (41.45)
11/21/97 01/20/98 New Jersey Steel (Von Roll) 162.86 170.59 166.67 148.65 411.11
11/24/97 02/03/98 Communicaitons Central Inc 30.23 25.37 12.00 20.00 71.43
12/19/97 06/03/98 Eclipse Telecommunicaitons Inc 18.02 19.92 14.39 (7.10) 16.13
12/29/97 03/17/98 Heartstream Inc (6.71) 18.17 (8.64) 10.80 (13.10)
01/06/98 03/02/98 DBA Systems Inc 38.40 44.29 25.58 5.59 57.77
01/14/98 06/02/98 Meridian Point Realty Trust 38.78 65.85 88.89
01/15/98 06/11/98 OHM Corp 24.21 45.08 26.77 31.36
01/16/98 02/25/98 Checkmate Electronics Inc 4.83 9.37 37.52 10.22 (29.86)
01/21/98 05/15/98 BKC Semiconductors Inc 66.73 59.48 66.73 (58.79) (33.31)
01/22/98 09/29/98 BT Office Products Intl Inc 32.53 78.86 78.86 30.18 44.74
01/28/98 03/05/98 Sun Coast Industries Inc 56.36 62.26 84.95 115.00 244.00
01/29/98 06/05/98 Monroe Inc 5.07 10.46 6.37 (3.19) 74.06
01/29/98 05/21/98 ProSource Inc (Onex Corp) 126.42 106.90 100.00
02/04/98 06/09/98 TresCom International Inc 25.17 30.86 51.52 5.37 39.35
02/10/98 06/30/98 Ryan Beck & Co, Livingston, NJ 23.21 21.29 25.20 38.57 104.21
02/17/98 08/17/98 Bell Sports Corp 13.89 13.10 8.61 15.49 90.70
02/24/98 05/04/98 Somatogen Inc 35.85 39.81 92.00 58.24 (31.43)
03/02/98 04/30/98 Signature Brands USA Inc 57.14 60.98 106.25 73.68 103.08
03/05/98 05/20/98 Intelligent Electronics Inc 5.74 19.22 34.37 44.76 125.19
03/06/98 04/30/98 Proxima Corp 31.34 25.71 23.94 58.56 44.26
03/10/98 06/19/98 Corcom Inc 33.33 31.65 36.84 36.84 62.50
03/16/98 07/10/98 International Murex Tech Corp 21.64 38.21 50.73 (97.44) (96.56)
04/03/98 07/21/98 Bertucci's Inc 35.48 35.48 35.48 58.49 86.67
04/15/98 05/29/98 Simulation Sciences Inc 24.03 16.79 11.11 (26.61) 6.67
04/28/98 07/20/98 Hein-Werner Corp 52.73 65.25 80.00 83.27 96.00
04/29/98 09/25/98 Group I Software Inc 71.60 61.51 71.60 115.37 80.07
05/04/98 06/10/98 Farah Inc 33.33 44.00 39.81 60.00 (10.00)
05/07/98 06/30/98 InTime Systems International 18.80 14.97 28.43
05/29/98 08/06/98 Mid-America Realty Investments 5.00 6.33 2.44 1.20 9.09
06/01/98 08/28/98 PST Vans Inc 32.80 35.82 10.67 24.50 159.83
06/11/98 07/02/98 Imo Industries Inc (1.05) 4.44 2.55
07/28/98 09/10/98 CyberMedia Inc 25.62 38.18 117.14 8.57 (34.48)
09/14/98 09/14/98 Icon CMT Corp 65.52 60.00 (4.00) (25.87)
Mean: 34.3% 42.3% 48.5% 58.0% 45.8%
</TABLE>
Source: Securities Data Company, Inc.; Three month and one-year premiums
calculated using security prices from FactSet Research Systems, Inc. Commercial
banks and other similar financial institutions were excluded for the purpose of
this analysis.
Page F-5
<PAGE>
Merger Premiums to Market Value Analysis
Mergers with Target Price Equal to or Greater than $10 per Share
Announced and Completed 1/1/96-10/9/98
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date Date
Announced Effective Target Name Target Business Description Acquiror Name
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
01/05/96 07/01/96 Safety Fund Corp Closed-end investment fund CFX Corp, Keene, New Hampshire
01/08/96 04/30/96 Loral Corp Mnfr defense electronics Lockheed Martin Corp
01/08/96 03/04/96 US Delivery Systems Inc. Pvd courier services Corporate Express Inc
01/09/96 04/30/96 Technalysis Corp Develop software CompuWare Corp
01/18/96 07/02/96 Corvita Corp Manufacture medical equipment Pfizer Inc.
01/22/96 04/11/96 Premier Industrial Corp Whl electronic parts and equip Farnell Electronics PLC
01/24/96 08/08/96 National Lodging Corp Own and operate casinos Chartwell Leisure Associates
01/25/96 06/12/96 Dual Drilling (Mosvold Shippg) Oil and gas drilling ENSCO International Inc
01/30/96 05/31/96 Daig Corporation Mnfr pacemakers St Jude Medical Inc
01/31/96 03/04/96 Tivoli Systems Inc Dvlp systems mgmt software IBM Corp
02/01/96 04/12/96 Health Wise of America Inc Own and operate HMO United HealthCare Corp
02/05/96 04/30/96 DiMark Inc. Pvd database marketing svcs Harte-Hanks Inc.
02/07/96 05/07/96 Pyxis Corp Provide med equip leasing svcs Cardinal Health Inc
02/12/96 05/01/96 Duracraft Corp Mnfr electric housewares Honeywell Inc
02/13/96 09/18/96 Citicasters(American Finl Grp) Own, op TV, radio stations Jacor Communications Inc
02/14/96 03/20/96 Helene Curtis Industries Inc Mnfr perfumes, cosmetics Unilever NV
02/15/96 05/14/96 Andros Inc Mnfr infared gas analyzers Genstar Capital Partners II LP
02/16/96 05/30/96 Circle K Corp Operate convenience stores Tosco Corp
02/16/96 06/13/96 Forum Group Inc Own, operate nursing homes Marriott International Inc
02/20/96 07/24/96 Davidson & Associates Inc. Develop educational software CUC International Inc.
02/20/96 07/24/96 Sierra On-Line Inc Develop software for games CUC International Inc
02/23/96 07/01/96 Cray Research Inc Manufacture supercomputers Silicon Graphics Inc
02/26/96 09/16/96 Sterile Concepts Inc Mnfr sterilized surgical trays Maxxim Medical Inc
02/26/96 06/18/96 Tide West Oil Co Oil and gas exploration, prodn HS Resources Inc
02/27/96 05/24/96 Brandon Systems Corp Personnel agency, consulting Interim Services Inc
02/29/96 07/10/96 Big O Tires Inc Own, operate tire stores TBC Corp
03/04/96 04/08/96 Guardsman Products Inc Mnfr coatings, cleaning prod Lilly Industries, Inc
03/07/96 07/03/96 Acme-Cleveland Corp Mnfr metal cutting tools Danaher Corp
03/11/96 08/02/96 Life Partners Group Inc Life insurance holding company Conseco Inc
03/18/96 07/01/96 Athena Neurosciences Inc Manufacture pharmaceuticals Elan Corp PLC
03/18/96 08/30/96 Microtek Medical Inc Mnfr, whl surgical supplies Isolyser Co Inc
03/25/96 07/01/96 InStent Inc Mfr surgical instrumentation Medtronic Inc
03/26/96 08/09/96 DeBartolo Realty Corp Real estate investment trust Simon Property Group Inc.
03/28/96 08/01/96 Stop & Shop Cos Own, op supermarkets Koninklijke Ahold NV
03/29/96 04/26/96 Great American Mgmt & Invt Inc Invt advice and financial svcs Equity Holdings, Chicago, IL
03/29/96 07/02/96 Hayes Wheels International Inc Mnfr motor vehicle parts Motor Wheel Corp
03/29/96 08/07/96 MediSense Inc Mnfr blood monitoring systems Abbot Laboratories
03/29/96 09/03/96 Regional Acceptance Corp Pvd consumer financing svcs Southern Natl, Winston-Salem, NC
04/01/96 04/01/97 Pacific Telesis Group Pvd telecommun svcs; hldg co SBC Communications Inc
04/01/96 07/19/96 US Healthcare Inc Own and operate HMO's Aetna Life & Casualty Co
04/02/96 08/15/96 Teledyne Inc Manufacture aviation products Allegheny Ludlum Corp
04/08/96 08/16/96 Cellular Communications Inc Operate cellular telephone sys AirTouch Communications
04/10/96 10/15/96 Waterhouse Investor Services Discount brokerage holding co Toronto-Dominion Bank
04/17/96 07/31/96 Tucker Drilling Co Inc Oil & gas contract drilling Patterson Energy Inc
04/22/96 07/10/96 StrataCom Inc Manufacture telecommun equip Cisco Systems Inc
04/22/96 06/03/96 Westcott Communicatons Inc Pvd motion picture prodn svcs K-III Communications Corp
04/30/96 08/12/96 UUNet Technologies Inc Internet service provider MFS Communications Co Inc
05/01/96 06/28/96 Quantum Health Resources Inc Provide home health care svcs Olsten Corp
05/01/96 08/21/96 Uniroyal Chemical Co Mnfr pesticides, rubber chems Crompton & Knowles Corp
05/07/96 07/03/96 Guaranty National Corp Insurance company Orion Capital Corp
05/07/96 08/14/96 Kahler Realty Corp Real estate investment trust Tiger Real Estate Fund LP
05/10/96 08/22/96 CyCare Systems Inc Provide accounting services HBO & Co
05/10/96 12/11/96 Transnational Re Corp Property reinsurance company PXRE Corp
05/13/96 08/15/96 MICOM Communications Corp Mnfr communications equipment Northern Telecom Ltd(BCE Inc.)
05/14/96 09/05/96 Caremark International Inc Pvd home health care services MedPartners/Mullikin Inc
05/15/96 08/23/96 Davis Water & Waste Industries Water distn and treatment prod United StatesFilter Corp
05/16/96 11/15/96 A+ Network Inc Pvd paging servics Metrocall Inc
05/20/96 07/23/96 AmeriData Technologies Inc Whl computers, peripherals General Electric Capital Svces
05/20/96 12/30/96 Continental Waste Industries Pvd waste disposal services Republic Industries Inc
05/20/96 10/31/96 Sterling Healthcare Group Inc Own, op doctor's offices. FPA Medical Management Inc
05/24/96 07/02/96 Masland Corp Mnfr motor vehicle parts Lear Corp
05/27/96 02/16/97 SyStemix Inc(Novartis AG) Mnfr, dvlp cellular processes Norvartis AG
05/31/96 12/19/96 Addington Resources Inc Bituminous coal mining Republic Industries Inc
05/31/96 08/30/96 Image Industries Inc. Pvd plastic recycling svcs Maxim Group Inc
06/03/96 08/05/96 Heltel Broadcasting Corp Own, op radio bdcstg stations Clear Channel Communications
06/03/96 09/30/96 Univar Corp Whl chemicals, pesticides Pakhoed Holding NV
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Value of Enter-
Trans- prise
Date Date Acquiror action Value
Announced Effective Target Name Business Description ($ mil) ($ mil)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
01/05/96 07/01/96 Safety Fund Corp Savings and loan 28.30 206.25
01/08/96 04/30/96 Loral Corp Mnfr aerospace systems, prod 8,762.40 8,322.78
01/08/96 03/04/96 US Delivery Systems Inc. Retail office supplies 428.70 456.04
01/09/96 04/30/96 Technalysis Corp Dvlp, whl software systems 32.60 28.79
01/18/96 07/02/96 Corvita Corp Manufacture pharmaceuticals 78.50 78.53
01/22/96 04/11/96 Premier Industrial Corp Mnfr, whl electronic components 2,722.70 2,720.93
01/24/96 08/08/96 National Lodging Corp Own and operate hotels 57.00 21.75
01/25/96 06/12/96 Dual Drilling (Mosvold Shippg) Pvd oil, gas drilling svcs. 224.70 352.22
01/30/96 05/31/96 Daig Corporation Mnfr heart valves, x-ray equip 441.30 419.98
01/31/96 03/04/96 Tivoli Systems Inc Mnfr computers, office equip 709.80 688.03
02/01/96 04/12/96 Health Wise of America Inc Own and operate HMOs 271.10 268.54
02/05/96 04/30/96 DiMark Inc. Pvd direct marketing services 151.80 145.08
02/07/96 05/07/96 Pyxis Corp Whl pharmaceutical products 907.30 870.02
02/12/96 05/01/96 Duracraft Corp Mnfr automation, control sys 286.70 295.83
02/13/96 09/18/96 Citicasters(American Finl Grp) Own, op radio bdcstg stations 767.60 746.54
02/14/96 03/20/96 Helene Curtis Industries Inc Produce foods; holding company 737.40 882.13
02/15/96 05/14/96 Andros Inc Investment firm 92.60 61.21
02/16/96 05/30/96 Circle K Corp Petroleum refining 983.00 951.57
02/16/96 06/13/96 Forum Group Inc Own, op hotels, restaurants 622.30 598.84
02/20/96 07/24/96 Davidson & Associates inc. Provide discount club svcs 1,145.00 1,141.54
02/20/96 07/24/96 Sierra On-Line Inc Provide discount club svcs 911.00 964.42
02/23/96 07/01/96 Cray Research Inc Manufacture computer systems 770.00 776.92
02/26/96 09/16/96 Sterile Concepts Inc Mnfr surgical instruments 140.20 145.64
02/26/96 06/18/96 Tide West Oil Co Oil and gas exploration, prodn 201.30 199.61
02/27/96 05/24/96 Brandon Systems Corp Pvd human resource solutions 165.20 162.70
02/29/96 07/10/96 Big O Tires Inc Whl tires, automobile parts 56.60 69.32
03/04/96 04/08/96 Guardsman Products Inc Mnfr industrial finishings 227.80 247.93
03/07/96 07/03/96 Acme-Cleveland Corp Mnfr tools, control equipment 204.40 193.81
03/11/96 08/02/96 Life Partners Group Inc Insurance holding company 838.80 721.52
03/18/96 07/01/96 Athena Neurosciences Inc Mnfr drug delivery systems 601.30 477.78
03/18/96 08/30/96 Microtek Medical Inc Mnfr surgical supplies 108.60 104.86
03/25/96 07/01/96 InStent Inc Mnfr medical technology prods 233.70 204.11
03/26/96 08/09/96 DeBartolo Realty Corp Real estate investment trust 2,962.10 2,782.11
03/28/96 08/01/96 Stop & Shop Cos Own, operate supermarkets 2,870.80 3,029.71
03/29/96 04/26/96 Great American Mgmt & Invt Inc Investment firm 63.30 746.41
03/29/96 07/02/96 Hayes Wheels International Inc Manufacture automotive parts 563.80 695.07
03/29/96 08/07/96 MediSense Inc Mnfr pharmaceuticals, med equip 821.60 797.41
03/29/96 09/03/96 Regional Acceptance Corp Bank holding company 160.70 261.86
04/01/96 04/01/97 Pacific Telesis Group Provide telecommun services 16,490.00 22,421.02
04/01/96 07/19/96 US Healthcare Inc Insurance Company 8,939.00 7,793.34
04/02/96 08/15/96 Teledyne Inc Mnfr specialty materials, metal 2,097.50 2,442.37
04/08/96 08/16/96 Cellular Communications Inc Pvd telecommunications svcs 1,657.40 2,910.44
04/10/96 10/15/96 Waterhouse Investor Services Bank holding company 526.00 551.24
04/17/96 07/31/96 Tucker Drilling Co Inc Pvd contract drilling services 23.30 15.86
04/22/96 07/10/96 StrataCom Inc Mnfr inter-networking systems 4,833.50 4,728.08
04/22/96 06/03/96 Westport Communicatons Inc Publish magazines 438.90 421.64
04/30/96 08/12/96 UUNet Technologies Inc Pvd telephone communs svcs 2,060.90 2037.02
05/01/96 06/28/96 Quantum Health Resources Inc Pvd temporary personnel svcs 270.20 301.17
05/01/96 08/21/96 Uniroyal Chemical Co Mnfr chemicals, dyes, flavors 1,463.40 1,326.16
05/07/96 07/03/96 Guaranty National Corp Insurance company; holding co 85.10 361.07
05/07/96 08/14/96 Kahler Realty Corp Real estate investment trust 222.70 212.81
05/10/96 08/22/96 CyCare Systems Inc Dvlp healthcare software 277.10 252.05
05/10/96 12/11/96 Transnational Re Corp Reinsurance company 133.10 165.35
05/13/96 08/15/96 MMICOM Communications Corp Mnfr telecommunications equip 138.30 144.31
05/14/96 09/05/96 Caremark Internation Inc Pvd management health services 2,707.80 3,139.10
05/15/96 08/23/96 Davis Water & Waste Industries Mfr water treatment equip 100.80 109.50
05/16/96 11/15/96 A+Network Inc Pvd local paging services 345.10 342.75
05/20/96 07/23/96 AmeriData Technologies Inc Pvd financing services 454.80 734.65
05/20/96 12/30/96 Continental Waste Industries Provide waste disposal svcs 345.40 360.35
05/20/96 10/31/96 Sterling Healthcare Group Inc Pvd health care mgmet services 157.50 172.34
05/24/96 07/02/96 Masland Corp Mnfr automobile seats 413.50 444.87
05/27/96 02/16/97 SyStemix Inc(Novartis AG) Manufacture pharmaceuticals 107.60 401.60
05/31/96 12/19/96 Addington Resources Inc Provide waste disposal svcs 317.80 358.73
05/31/96 08/30/96 Image Industries Inc. Own, op floor covering fran 105.10 152.44
06/03/96 08/05/96 Heltel Broadcasting Corp Own, op TV, radio bdcstg station 315.30 370.10
06/03/96 09/30/96 Univar Corp Pvd freight transp services 331.80 605.30
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Premium
----------------------------------------------------------------------------------
Date Date 1 Day Prior 1 Week Prior 4 Weeks Prior 3 Months Prior 1 Year Prior
Announced Effective Target Name to Annc. Date to Annc. Date to Annc. Date to Annc. Date to Annc. Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
01/05/96 07/01/96 Safety Fund Corp 3.53 10.06 145.06 60.04
01/08/96 04/30/96 Loral Corp 4.83 7.42 8.19
01/08/96 03/04/96 US Delivery Systems Inc. 9.57 8.62 32.63 123.01 30.57
01/09/96 04/30/96 Technalysis Corp 12.00 16.67 16.67 30.23 9.80
01/18/96 07/02/96 Corvita Corp -2.38 2.50 -2.38 148.48 24.24
01/22/96 04/11/96 Premier Industrial Corp 37.17 35.75 34.37 65.64 18.63
01/24/96 08/08/96 National Lodging Corp 34.12 26.67 42.50 46.15
01/25/96 06/12/96 Dual Drilling (Mosvold Shippg) 8.86 13.19 23.65 72.36 51.68
01/30/96 05/31/96 Daig Corporation 20.17 22.72 26.77
01/31/96 03/04/96 Tivoli Systems Inc 25.83 25.00 41.79 49.31
02/01/96 04/12/96 Health Wise of America Inc 8.35 9.07 18.63 15.26 32.13
02/05/96 04/30/96 DiMark Inc. 1.70 1.70 0.84 33.93 16.50
02/07/96 05/07/96 Pyxis Corp 53.27 60.93 66.48 10.35 67.93
02/12/96 05/01/96 Duracraft Corp 58.18 50.00 68.12 16.78 82.20
02/13/96 09/18/96 Citicasters(American Finl Grp) 9.26 15.69 28.26 337.04 349.52
02/14/96 03/20/96 Helene Curtis Industries Inc 18.64 30.23 71.78
02/15/96 05/14/96 Andros Inc 16.13 24.14 35.85 4.35 12.50
02/16/96 05/30/96 Circle K Corp 45.85 42.47 68.82 830.11 548.63
02/16/96 06/13/96 Forum Group Inc 4.00 8.33 44.44
02/20/96 07/24/96 Davidson & Associates inc. 72.30 87.50 67.76 129.77 30.12
02/20/96 07/24/96 Sierra On-Line Inc 69.33 71.70 90.38 160.60 65.51
02/23/96 07/01/96 Cray Research Inc 18.81 21.21 20.60 83.21 34.83
02/26/96 09/16/96 Sterile Concepts Inc 53.85 60.00 55.34
02/26/96 06/18/96 Tide West Oil Co 44.64 44.64 51.52 74.36 27.28
02/27/96 05/24/96 Brandon Systems Corp 32.21 39.41 29.77 758.54 554.88
02/29/96 07/10/96 Big O Tires Inc 5.60 7.32 12.82 22.22 23.36
03/04/96 04/08/96 Guardsman Products Inc 32.37 32.37 57.27
03/07/96 07/03/96 Acme-Cleveland Corp 50.00 55.84 56.86
03/11/96 08/02/96 Life Partners Group Inc 35.48 34.40 55.56 -1.75 69.70
03/18/96 07/01/96 Athena Neurosciences Inc 20.66 16.80 40.39 220.88 73.81
03/18/96 08/30/96 Microtek Medical Inc 37.50 40.63 43.90 201.85 129.19
03/25/96 07/01/96 InStent Inc 1.03 9.14 5.87 228.93
03/26/96 08/09/96 DeBartolo Realty Corp 11.59 16.57 25.54 15.54 23.17
03/28/96 08/01/96 Stop & Shop Cos 25.23 27.01 45.65
03/29/96 04/26/96 Great American Mgmt & Invt Inc 2.56 4.17 3.63 41.34 2.04
03/29/96 07/02/96 Hayes Wheels International Inc 29.29 33.33 43.02 62.03 24.88
03/29/96 08/07/96 MediSense Inc 48.76 48.76 39.00 123.60 42.29
03/29/96 09/03/96 Regional Acceptance Corp 9.33 6.60 25.41 6.60 9.33
04/01/96 04/01/97 Pacific Telesis Group 38.70 36.24 33.88 27.24 14.04
04/01/96 07/19/96 US Healthcare Inc 24.25 21.28 18.75 28.81 23.91
04/02/96 08/15/96 Teledyne Inc 113.55 115.12 108.97 39.31 35.44
04/08/96 08/16/96 Cellular Communications Inc 7.45 7.84 6.28 87.23 94.69
04/10/96 10/15/96 Waterhouse Investor Services 15.15 19.69 65.22
04/17/96 07/31/96 Tucker Drilling Co Inc 4.68 7.13 10.05 71.68 34.13
04/22/96 07/10/96 StrataCom Inc 48.39 59.72 79.69 192.99 57.00
04/22/96 06/03/96 Westport Communicatons Inc 43.33 57.80 56.36 45.15 37.05
04/30/96 08/12/96 UUNet Technologies Inc 27.59 39.91 125.91 58.86
05/01/96 06/28/96 Quantum Health Resources Inc 23.65 29.32 60.18 9.27 54.90
05/01/96 08/21/96 Uniroyal Chemical Co 27.66 44.58 55.84 25.00 64.38
05/07/96 07/03/96 Guaranty National Corp 15.63 15.63 22.31 12.98 26.50
05/07/96 08/14/96 Kahler Realty Corp 9.68 13.33 9.68 88.89 46.24
05/10/96 08/22/96 CyCare Systems Inc 6.33 8.99 61.02 101.69 79.49
05/10/96 12/11/96 Transnational Re Corp 12.47 16.52 8.70 22.75 0.81
05/13/96 08/15/96 MMICOM Communications Corp -14.29 9.09 58.35 74.55 57.38
05/14/96 09/05/96 Caremark Internation Inc 9.95 16.00 18.17 81.93 25.81
05/15/96 08/23/96 Davis Water & Waste Industries 36.18 59.03 62.30 207.74 111.57
05/16/96 11/15/96 A+Network Inc 36.13 40.67 63.88 53.45 72.24
05/20/96 07/23/96 AmeriData Technologies Inc 4.07 25.49 47.13 109.84 62.03
05/20/96 12/30/96 Continental Waste Industries 66.73 62.18 82.04 223.19 117.56
05/20/96 10/31/96 Sterling Healthcare Group Inc -3.07 3.67 13.09
05/24/96 07/02/96 Masland Corp 6.12 18.18 30.00 84.07 77.78
05/27/96 02/16/97 SyStemix Inc(Novartis AG) 4.70 69.57 59.18 59.18 39.29
05/31/96 12/19/96 Addington Resources Inc 24.88 43.93 50.30 58.73 69.84
05/31/96 08/30/96 Image Industries Inc. 17.00 15.84 23.16
06/03/96 08/05/96 Heltel Broadcasting Corp 2.22 4.55 2.22 253.85 162.86
06/03/96 09/30/96 Univar Corp 57.17 54.06 58.78 55.60 80.93
</TABLE>
Page F-6
<PAGE>
Merger Premiums to Market Value Analysis
Mergers with Target Price Equal to or Greater than $10 per Share
Announced and Completed 1/1/96-10/9/98
(continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date Date
Announced Effective Target Name Target Business Description Acquiror Name
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
06/04/96 09/20/96 HomeTown Buffet Inc Own and operate restaurants Buffets Inc.
06/06/96 10/10/96 AT&T Capital Corp (AT&T Corp) Pvd leasing, financing services Investor Group
06/06/96 12/18/96 Bally Entertainment Corp Own, op casino hotels Hilton Hotels Corp
06/06/96 07/09/96 FinishMaster Inc (Maxco Inc) Whl automotive paint, coatings Lacy Distribution Inc (LDI Ltd)
06/10/96 08/23/96 Orbit Semiconductor Inc Manufacture semiconductors DII Group Inc
06/11/96 07/23/96 Community Health Systems Inc Own and operate hospitals Forstmann Little & Co
06/14/96 08/23/96 Brenco Inc Ball and roller bearings Varlen Corp
06/17/96 11/19/96 Penril DataComm Networks Inc Mnfr data communications equip Bay Networks Inc
06/18/96 09/30/96 Builders Warehouse Assn Inc Pvd LAN design services Osicom Technologies Inc
06/20/96 12/31/96 Infinity Broadcasting Corp Own, op radio broadcasting stns Westinghouse Electric Corp
06/20/96 09/16/96 Public Storage Properties X Pvd warehousing, storage svcs Public Storage Inc
06/20/96 09/16/96 Public Storage Properties XII Rent storage space Public Storage Inc
06/24/96 09/03/96 Sanifill Inc Provide waste management svcs USA Waste Services Inc
06/28/96 10/02/96 National Re Corp Fire, casualty insurance co General Re Corp
06/28/96 09/27/96 Salem Corp Whl industrial mach and equip Investor Group
07/01/96 10/04/96 Landmark Graphics Corp Dvlp CAE sys for geoscientists Halliburton Co
07/01/96 03/25/97 Renaissance Commun Corp Own and operate TV stations Tribune Co
07/02/96 08/08/96 Ambar Inc Pvd oil and gas field services Beacon Group Energy Investment
07/17/96 01/22/97 New World Common Grp (Mafco) Operate television stations News Corp Ltd
07/19/96 07/01/97 Portland General Corp Electric utility holding co Enron Corp
07/19/96 08/27/97 Rexene Corp Mnfr petrochemical products Huntsman Corp
07/22/96 10/03/96 Global Natural Resources Inc Oil and gas exploration, prodn Seagull Energy Corp
07/22/96 10/25/96 Telchit Corp Mnfr data transmission equip Cisco Systems Inc
07/22/96 07/29/97 United Cities Gas Co Gas utility Atmos Energy Corp
07/23/96 02/19/97 Osborn Communications Corp Own, op radio and TV stations Capstar Broadcasting Partners
07/24/96 10/11/96 PCI Services Inc Pvd product packaging services Cardinal Health Inc
08/02/96 11/29/96 First Colony Corp Insurance holding company General Electric Capital Corp
08/05/96 04/07/97 EZ Communications Inc Own, operate radio stations American Radio Systems Corp
08/05/96 02/14/97 FHP International Corp Own and operate HMOs PacifiCare Health Systems Inc
08/07/96 10/03/96 Douglas & Lomason Co Wholesale motor vehicles Magna International Inc
08/08/96 09/17/96 Roto-Rooter Inc (Chemed Corp) Provide Plumbing services, prod Chemed Corp
08/09/96 08/06/97 NorAm Energy Corp Oil and gas exploration, prodn Houston Industries Inc
08/12/96 03/02/98 Atlantic Energy (Conoco) Public utility holding co Delmarva Power & Light
08/14/96 11/25/96 American Re Corp Property, casualty insurance co Muenchener Rueckversicherungs
08/14/96 11/07/96 Payco American Corp Credit collection services OSI Holdings Corp
08/14/96 10/24/96 Redman Industries Inc Manufacture mobile homes Champion Enterprises Inc
08/15/96 09/26/96 Orchard Supply Hardware Stores Own, op home improvement ctrs Sears Roebuck & Co
08/19/96 09/20/96 CasTech Aluminum Group Inc Mnfr aluminum sheets Commonwealth Aluminum Corp
08/19/96 12/16/96 Griffin Gaming & Entertainment Own, op gaming facilities Sun International Hotels Ltd
08/22/96 10/29/96 Meta Software Inc Develop software Avant! Corp
08/26/96 12/17/96 American Travellers Corp Insurance company Conseco Inc
08/26/96 12/31/96 Bankers Life Holding (Conseco) Life ins co; holding company Conseco Inc
08/26/96 03/04/97 Capitol American Financial Pvd accident, life ins svcs Conseco Inc
08/26/96 11/14/96 Career Horizons Inc Pvd temporary personnel svcs AccuStaff Inc
08/26/96 12/31/96 MFS Communications Co Inc Pvd telephone communs svcs WorldCom Inc
08/26/96 01/09/97 Spreckels Industries Inc Produce sugar; mnfr indust prod Columbus McKinnon Corp
08/28/96 11/08/96 Red Lions Hotels (Red Lion Inn) Own, op hotels Doubletree Corp
08/29/96 11/14/96 Amtrol Inc Mnfr plumbing, heating systems Cypress Group LLC
09/02/96 03/06/97 Arcadian Corp Mnfr phosphatic fertilizers Potash Corp of Saskatchewan
09/09/96 12/23/96 Big B Inc (Revco DS Inc) Drug, grocery retail stores Revco DS Inc
09/12/96 12/31/96 Duracell International Inc Manufacture alkaline batteries Gillette Co
09/23/96 12/04/96 Diamond Shamrock Inc Mnfr, wholesale petroleum Ultramar Corp
09/24/96 12/09/96 GMIS Inc Develop software HBO & Co
09/26/96 02/28/97 Providence Journal Co Own, op TV broadcasting stns AH Belo Corp
09/26/96 12/23/96 Transport Holdings Insurance holding company Conseco Inc
09/30/96 06/27/97 Belden & Blake Corp Oil and gas exploration, prodn Texas Pacific Group Inc
10/01/96 12/31/96 South West Property Trust Inc Real estate investment trust United Dominion Realty Tr Inc
10/02/96 02/03/97 Baby Superstore Inc Own, op children's wear stores Toys 'R' Us Inc
10/02/96 02/07/97 TSX Corporation Mnfr communications equipment ANTEC Corp
10/03/96 02/13/97 Kinder-Care Learning Centers Operate day care centers Kohlberg Kravis Roberts & Co
10/03/96 12/31/96 LXE (Electromagnetic Sciences) Mnfr microwave components Electromagnetic Sciences Inc
10/07/96 12/11/96 Augat Inc Mnfr electn, hardware prods Thomas & Betts Corp
10/07/96 12/02/96 Cheyenne Software Inc Develop computer software Computer Associates Intl Inc
10/08/96 11/22/96 Super Food Services Inc Wholesale food products Nash Finch Co
10/10/96 01/31/97 Gelman Sciences Inc Mnfr medical filter devices Pall Corp
10/14/96 06/26/98 Pacific Enterprises Inc Natural gas utility Enova Corp
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Value of Enter-
Trans- prise
Date Date Acquiror action Value
Announced Effective Target Name Business Description ($ mil) ($ mil)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
06/04/96 09/20/96 HomeTown Buffet Inc Own and operate restaurants 174.00 195.94
06/06/96 10/10/96 AT&T Capital Corp (AT&T Corp) Investor group 2128.60 9188.70
06/06/96 12/18/96 Bally Entertainment Corp Own, operate hotels 3138.10 3108.89
06/06/96 07/09/96 FinishMaster Inc (Maxco Inc) Whl industrial machinery equip 62.60 111.13
06/10/96 08/23/96 Orbit Semiconductor Inc Mnfr electronic components 118.30 105.05
06/11/96 07/23/96 Community Health Systems Inc Investment company 1080.00 1267.50
06/14/96 08/23/96 Brenco Inc Mnfr custom tubular products 161.40 164.89
06/17/96 11/19/96 Penril DataComm Networks Inc Mnfr, whl data networking prods 117.60 124.14
06/18/96 09/30/96 Builders Warehouse Assn Inc Mnfr communications equipment 69.30 73.34
06/20/96 12/31/96 Infinity Broadcasting Corp Mnfr elec defense electn equip 4737.80 4153.30
06/20/96 09/16/96 Public Storage Properties X Real estate investment trust 50.20 39.48
06/20/96 09/16/96 Public Storage Properties XII Real estate investment trust 55.20 37.66
06/24/96 09/03/96 Sanifill Inc Pvd waste disposal services 1236.90 1604.45
06/28/96 10/02/96 National Re Corp Insurance holding company 904.60 1110.32
06/28/96 09/27/96 Salem Corp Investor group 46.60 31.81
07/01/96 10/04/96 Landmark Graphics Corp Mnfr oil field machinery 586.70 531.76
07/01/96 03/25/97 Renaissance Commun Corp Publish newspaper, cable TV sys 1094.40 1118.68
07/02/96 08/08/96 Ambar Inc Investment firm 66.60 81.36
07/17/96 01/22/97 New World Common Grp (Mafco) Publish newspapers, magazines 2173.00 4241.94
07/19/96 07/01/97 Portland General Corp Own, operate gas pipelines 2901.70 2982.29
07/19/96 08/27/97 Rexene Corp Mnfr petrochemicals 606.80 494.49
07/22/96 10/03/96 Global Natural Resources Inc Own, op gas pipelines 525.60 526.49
07/22/96 10/25/96 Telchit Corp Mnfr inter-networking systems 196.30 196.20
07/22/96 07/29/97 United Cities Gas Co Natural gas distribution svcs 496.50 508.19
07/23/96 02/19/97 Osborn Communications Corp Own, operate radio stations 89.90 110.81
07/24/96 10/11/96 PCI Services Inc Whl pharmaceutical products 208.00 209.59
08/02/96 11/29/96 First Colony Corp Pvd consumer financing svcs 1799.20 2011.94
08/05/96 04/07/97 EZ Communications Inc Own, op radio bdcstg station 687.30 623.19
08/05/96 02/14/97 FHP International Corp Own and operate HMO's 2000.10 2161.89
08/07/96 10/03/96 Douglas & Lomason Co Mnfr auto parts, accessories 134.60 213.95
08/08/96 09/17/96 Roto-Rooter Inc (Chemed Corp) Mnfr chems, janitorial equip 93.60 220.33
08/09/96 08/06/97 NorAm Energy Corp Electric utility holding co 3648.80 3750.59
08/12/96 03/02/98 Atlantic Energy (Conoco) Electric and gas utility 951.10 2155.87
08/14/96 11/25/96 American Re Corp Provide reinsurance services 3967.80 3830.43
08/14/96 11/07/96 Payco American Corp Investment holding firm 161.90 154.65
08/14/96 10/24/96 Redman Industries Inc Mnfr single-family houses 341.90 319.85
08/15/96 09/26/96 Orchard Supply Hardware Stores Department stores; finl svcs 423.70 412.74
08/19/96 09/20/96 CasTech Aluminum Group Inc Manufacture aluminum prods 328.70 322.74
08/19/96 12/16/96 Griffin Gaming & Entertainment Own, operate hotels 309.60 345.20
08/22/96 10/29/96 Meta Software Inc Develop software 139.30 136.90
08/26/96 12/17/96 American Travellers Corp Insurance holding company 868.30 968.71
08/26/96 12/31/96 Bankers Life Holding (Conseco) Insurance holding company 120.80 1534.75
08/26/96 03/04/97 Capitol American Financial Insurance holding company 715.50 695.10
08/26/96 11/14/96 Career Horizons Inc Provide staffing services 1010.30 835.76
08/26/96 12/31/96 MFS Communications Co Inc Pvd telecommunications svcs 13595.70 14885.50
08/26/96 01/09/97 Spreckels Industries Inc Mnfr industrial chains, hoists 259.40 248.37
08/28/96 11/08/96 Red Lions Hotels (Red Lion Inn) Own, operate hotel mgt co 1174.10 1129.01
08/29/96 11/14/96 Amtrol Inc Investment bank 227.20 218.87
09/02/96 03/06/97 Arcadian Corp Manufacture potash 1723.30 1424.49
09/09/96 12/23/96 Big B Inc (Revco DS Inc) Own, operate drug stores 335.40 401.15
09/12/96 12/31/96 Duracell International Inc Mnfr shaving razors and blades 7231.90 7764.78
09/23/96 12/04/96 Diamond Shamrock Inc Mnfr refined petroleum prods 860.90 1807.57
09/24/96 12/09/96 GMIS Inc Dvlp healthcare software 242.60 235.10
09/26/96 02/28/97 Providence Journal Co Newspapers; radio, TV stations 1429.60 1617.14
09/26/96 12/23/96 Transport Holdings Insurance holding company 299.90 242.62
09/30/96 06/27/97 Belden & Blake Corp Investment holding company 405.70 404.19
10/01/96 12/31/96 South West Property Trust Inc Real estate investment trust 547.80 526.41
10/02/96 02/03/97 Baby Superstore Inc Own, op retail toy stores 382.20 501.92
10/02/96 02/07/97 TSX Corporation Mnfr commun network products 254.30 214.63
10/03/96 02/13/97 Kinder-Care Learning Centers Leverage buyout firm 571.00 510.01
10/03/96 12/31/96 LXE (Electromagnetic Sciences) Mnfr microwave components 14.80 81.96
10/07/96 12/11/96 Augat Inc Mnfr electronic connectors 570.10 611.78
10/07/96 12/02/96 Cheyenne Software Inc Develop applications software 1247.60 1199.60
10/08/96 11/22/96 Super Food Services Inc Wholesale groceries 164.20 262.84
10/10/96 01/31/97 Gelman Sciences Inc Mnfr filters, separations equip 297.70 292.22
10/14/96 06/26/98 Pacific Enterprises Inc Electric and gas utility 2870.00 4159.40
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Premium
----------------------------------------------------------------------------------
Date Date 1 Day Prior 1 Day Prior 4 Weeks Prior 3 Months Prior 1 Year Prior
Announced Effective Target Name to Annc. Date to Annc. Date to Annc. Date to Annc. Date to Annc. Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
06/04/96 09/20/96 HomeTown Buffet Inc (3.27) 7.38 2.67 20.66 25.85
06/06/96 10/10/96 AT&T Capital Corp (AT&T Corp) 37.41 38.46 42.29
06/06/96 12/18/96 Bally Entertainment Corp 59.03 74.81 72.18 175.95 81.78
06/06/96 07/09/96 FinishMaster Inc (Maxco Inc) 30.42 27.76 42.27 9.82 42.27
06/10/96 08/23/96 Orbit Semiconductor Inc 37.78 36.10 57.18 (22.50) 69.09
06/11/96 07/23/96 Community Health Systems Inc 20.23 19.89 18.86 49.64 22.35
06/14/96 08/23/96 Brenco Inc 30.96 30.30 20.56 30.67 34.42
06/17/96 11/19/96 Penril DataComm Networks Inc 7.50 2.99 6.17
06/18/96 09/30/96 Builders Warehouse Assn Inc 9.67 15.95 35.32 370.00 37.08
06/20/96 12/31/96 Infinity Broadcasting Corp 12.76 10.82 15.27 33.11 7.01
06/20/96 09/16/96 Public Storage Properties X 13.85 13.08 10.83 20.40 5.26
06/20/96 09/16/96 Public Storage Properties XII 14.56 14.56 15.30 27.66 15.30
06/24/96 09/03/96 Sanifill Inc (1.02) 3.86 1.63 55.38 26.37
06/28/96 10/02/96 National Re Corp 45.21 65.63 60.61 60.61 57.04
06/28/96 09/27/96 Salem Corp 21.95 23.46 11.73 (11.50) 30.72
07/01/96 10/04/96 Landmark Graphics Corp 65.51 77.00 68.80 24.94 93.09
07/01/96 03/25/97 Renaissance Commun Corp 11.63 19.01 20.50 150.43 423.64
07/02/96 08/08/96 Ambar Inc 24.14 17.07 50.00 311.43 73.49
07/17/96 01/22/97 New World Common Grp (Mafco) 67.66 71.68 60.15 28.53 49.06
07/19/96 07/01/97 Portland General Corp 23.13 21.54 19.48 58.43 23.68
07/19/96 08/27/97 Rexene Corp 75.34 60.00 56.10 16.36 19.63
07/22/96 10/03/96 Global Natural Resources Inc 11.23 13.04 13.04 73.80 17.83
07/22/96 10/25/96 Telchit Corp 22.76 22.76 4.71 196.67 101.51
07/22/96 07/29/97 United Cities Gas Co 52.21 64.29 69.67 69.70 56.85
07/23/96 02/19/97 Osborn Communications Corp 28.13 50.00 38.20 108.54 44.75
07/24/96 10/11/96 PCI Services Inc 44.00 42.89 23.84 158.00 16.10
08/02/96 11/29/96 First Colony Corp 37.71 32.66 39.04 45.33 41.07
08/05/96 04/07/97 EZ Communications Inc 45.54 56.36 89.20 162.78 142.56
08/05/96 02/14/97 FHP International Corp 19.37 27.37 19.10 41.20 24.96
08/07/96 10/03/96 Douglas & Lomason Co 39.33 90.77 103.28 121.43 125.45
08/08/96 09/17/96 Roto-Rooter Inc (Chemed Corp) 12.33 12.33 11.19 25.19 20.15
08/09/96 08/06/97 NorAm Energy Corp 35.72 46.52 41.69 143.32 48.23
08/12/96 03/02/98 Atlantic Energy (Conoco) 5.34 3.83 3.09 (0.47) 5.34
08/14/96 11/25/96 American Re Corp 26.21 41.69 44.04 79.93 49.86
08/14/96 11/07/96 Payco American Corp 19.15 17.90 60.00 77.78 64.71
08/14/96 10/24/96 Redman Industries Inc 6.29 11.71 26.39 102.26 21.73
08/15/96 09/26/96 Orchard Supply Hardware Stores 17.65 25.56 28.44 137.29 8.95
08/19/96 09/20/96 CasTech Aluminum Group Inc 37.82 57.69 45.13 3.14 41.38
08/19/96 12/16/96 Griffin Gaming & Entertainment 88.88 88.88 69.28 52.07 52.07
08/22/96 10/29/96 Meta Software Inc 18.00 0.48 1.48 (27.49)
08/26/96 12/17/96 American Travellers Corp 30.09 37.35 81.17 230.54 61.36
08/26/96 12/31/96 Bankers Life Holding (Conseco) 14.94 10.50 11.73 31.58 25.79
08/26/96 03/04/97 Capitol American Financial 50.84 51.60 56.31 65.76 53.14
08/26/96 11/14/96 Career Horizons Inc 34.40 33.80 63.98 145.64 147.63
08/26/96 12/31/96 MFS Communications Co Inc 58.82 59.96 86.96 142.14 66.27
08/26/96 01/09/97 Spreckels Industries Inc 23.87 24.68 29.73 178.26 45.45
08/28/96 11/08/96 Red Lions Hotels (Red Lion Inn) 28.60 33.55 31.38
08/29/96 11/14/96 Amtrol Inc 71.21 56.94 56.94 137.89
09/02/96 03/06/97 Arcadian Corp 24.66 20.99 26.96 36.21 30.18
09/09/96 12/23/96 Big B Inc (Revco DS Inc) 36.63 66.27 58.62 10.40 68.29
09/12/96 12/31/96 Duracell International Inc 19.84 29.75 30.11 37.31 33.80
09/23/96 12/04/96 Diamond Shamrock Inc (3.90) 1.11 5.71 15.70 0.68
09/24/96 12/09/96 GMIS Inc 56.35 57.50 86.26 64.80 125.52
09/26/96 02/28/97 Providence Journal Co 58.38 64.43 65.49 109.89
09/26/96 12/23/96 Transport Holdings 25.80 35.27 32.18 41.52
09/30/96 06/27/97 Belden & Blake Corp 32.52 27.81 31.71 42.11 21.35
10/01/96 12/31/96 South West Property Trust Inc 9.31 9.31 13.39 18.98 12.37
10/02/96 02/03/97 Baby Superstore Inc 17.99 21.82 25.07 (46.86) 43.21
10/02/96 02/07/97 TSX Corporation 10.00 18.63 26.04 3.16 (22.41)
10/03/96 02/13/97 Kinder-Care Learning Centers 17.83 18.75 26.67 34.51 22.58
10/03/96 12/31/96 LXE (Electromagnetic Sciences) 22.09 14.13 19.32 28.10 23.58
10/07/96 12/11/96 Augat Inc 32.83 30.49 45.94 49.89 54.06
10/07/96 12/02/96 Cheyenne Software Inc 32.61 34.81 30.48
10/08/96 11/22/96 Super Food Services Inc 37.78 36.26 29.17 26.53 51.22
10/10/96 01/31/97 Gelman Sciences Inc 80.47 57.91 49.42 58.81 65.43
10/14/96 06/26/98 Pacific Enterprises Inc 7.43 8.72 11.87 98.59 76.24
</TABLE>
Page F-7
<PAGE>
Merger Premiums to Market Value Analysis
Mergers with Target Price Equal to or Greater than $10 per Share
Announced and Completed 1/1/96-10/9/98
(continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date Date
Announced Effective Target Name Target Business Description Acquiror Name
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
10/14/96 12/12/96 Thrifty Payless Holdings Inc Own, op drug store chain Rite Aid Corp
10/15/96 06/03/97 Conrail Inc Own, op freight railroad lines Investor Group
10/15/96 12/23/96 FlightSafety International Mnfr flight simulators Berkshire Hathaway Inc
10/17/96 01/30/97 OrNda HealthCorp Own, operate hospitals Tenet Healthcare Corp
10/21/96 03/31/97 Detroit & Canada Tunnel Corp Pvd tunnel operation services Investor Group
10/23/96 04/16/97 Syratech Corp Manufacture silver flatware Thomas H Lee Equity Fund III
10/28/96 05/07/97 Cooper & Chyan Technology Inc Develop software Cadence Design Systems Inc
10/28/96 01/15/97 Loctite Corp Mnfr adhesives & sealants Henkel KGaA
10/28/96 05/29/97 Wireless Cable of Atlanta Pvd wireless cable commons svc BellSouth Corp
10/30/96 04/08/97 Vons Cos Inc Own and operate supermarkets Safeway Inc
10/31/96 07/01/97 California Jockey Club/Bay Own, op horse racing tracks Patriot American Hospitality
10/31/96 12/18/96 Kash N'Karry Food Stores Inc Own and operate supermarkets Food Lion Inc
11/04/96 02/27/97 Eckerd Corp Operate retail drug stores JC Penney Co
11/11/96 04/30/97 PHH Corp Pvd auto, truck leasing svcs HFS Inc
11/12/96 06/12/97 Leslie's Poolmart Own, op swimming pool stores Investor Group
11/12/96 02/27/97 SQA Inc Whl software Rational Software Corp
11/13/96 01/20/97 Medex Inc Mnfr drug infusion products FCY Inc
11/18/96 01/02/97 Sudbury Inc Mnfr automotive parts Internet Corp
11/25/96 01/09/97 Opal Inc Mnfr special industry equip Applied Materials Inc
11/25/96 06/18/97 PanEnergy Corp. Oil and gas exploration, prodn Duke Power Co
11/26/96 12/30/96 Armor All Products (McKesson) Mnfr cleaners and waxes Clorox Co
11/27/96 03/27/97 Central Tractor Farm & Country Own, op tractor, hardware stores JW Childs Equity Partners LP
11/27/96 12/27/96 Central Tractor Farm & Country Own, op tractor, hardware stores JW Childs Equity Partners LP
11/27/96 01/16/97 Milgray Electronics Inc Whl electronic equip Bell Industries Inc
11/27/96 03/19/97 Owen Healthcare Inc Wholesale pharmaceuticals Cardinal Health Inc
11/29/96 04/30/97 Chicago Dock and Canal Trust Real estate investment trust CityFront Center LLC
11/29/96 01/06/97 ElectroStar Inc Mnfr printed circuit boards Tyco International Ltd
12/02/96 01/30/97 Eastbay Inc Own, operate mail order bus Venator Group Inc
12/02/96 03/03/97 Health Images Inc Provide magnetic imaging svcs HealthSouth Corp
12/05/96 02/26/97 Barefoot Inc Provide lawn care services ServiceMaster LP
12/05/96 03/27/97 Cavco Industries Inc Mnfr mobile homes Centex Corp
12/05/96 04/11/97 Public Storage Properties XIV Real estate investment trust Public Storage Inc
12/05/96 04/11/97 Public Storage Properties XV Real estate investment trust Public Storage Inc
12/05/96 05/05/97 Santa Fe Pacific Gold Corp Gold mining co Newmont Mining Corp
12/05/96 01/10/97 Zycon Corp Mnfr printed circuit boards Hadco Corp
12/11/96 02/21/97 Alexander & Alexander Services Pvd insurance brokerage svcs Aon Corp
12/16/96 01/27/97 Eljer Industries Inc Manufacture plumbing fixtures Zurn Industries Inc
12/16/96 04/16/97 Paragon Group Inc Real estate investment trust Camden Property Trust
12/16/96 05/30/97 Pioneer Financial Services Life, health, accident ins svcs Conseco Inc
12/16/96 01/27/97 Tylan General Inc Mnfr gas measure equipment Millipore Corp
12/17/96 08/01/97 McDonnell Douglas Corp Mnfr aerospace, defense equip Boeing Co
12/19/96 03/25/97 IWC Resources Corp Water utility holding company NIPSCO Industries Inc
12/24/96 04/16/97 Home Beneficial Corp Insurance holding company American General Corp
12/30/96 05/29/98 LILCO Electric utility Brooklyn Union Gas Co
01/07/97 02/25/97 American Medical Response Inc Provide ambulance services MedTrans Inc (Laidlaw Inc)
01/07/97 02/10/97 Bonray Drilling Corp On-shore oil and gas drilling DLB Oil & Gas Inc
01/13/97 04/25/97 OpenVision Technologies Inc Mnfr software, pvd programming Veritas Software Corp
01/13/97 09/02/97 Zurich Reinsurance Centre Insurance agency Zurich Versicherungs GmbH
01/14/97 04/01/97 Oxford Resources Corp Pvd passenger car leasing svcs Barnett Banks, Jacksonville, FL
01/14/97 04/30/97 Tencor Instruments Inc Mnfr test instruments KLA Instruments Corp
01/15/97 08/06/97 Value Health Inc Provide health plan services Columbia/HCA Healthcare Corp
01/16/97 02/28/97 Epic Design Technology Inc Develop CAD software Synposys Inc
01/16/97 05/30/97 Wellsford Residential Ppty Real estate investment trust Equity Residential Pptys Trust
01/17/97 06/17/97 Avemco Corp Fire, marine, casualty ins co HCC Insurance Holdings Inc
01/17/97 04/11/97 Studio Plus Hotels Inc Own, operate hotels, motels Extended Stay America Inc
01/20/97 06/27/97 First USA Inc Pvd credit card svcs BANC ONE Corp, Columbus, Ohio
01/20/97 04/08/97 Target Therapeutics Inc Mnfr, whl mini-surgical devices Boston Scientific Corp
01/21/97 06/26/97 InPhyNet Medical Management Pvd physician management svcs MedPartners Inc
01/21/97 07/09/97 Mafco Consolidated Grp (Mafco) Mnfr cosmetics, beauty products Mafco Holdings Inc
01/22/97 03/05/97 Norand Corp Mnfr electronic info systems Western Atlas Inc
01/23/97 05/19/97 Amphenol Corp Manufactures connectors Kohlberg Kravis Roberts & Co
01/23/97 06/02/98 ESELCO Inc Electric utility Wisconsin Energy Corp
01/27/97 03/07/97 Measure Corp Mnfr process control systems Honeywell Inc
01/27/97 05/30/97 Revco DS Inc Own, operate drug stores CVS Corp
02/03/97 03/10/97 Kysor Industrial Corp Mnfr vehicle components Scotsman Industries Inc
02/05/97 05/31/97 Morgan Stanley Group Inc Investment bank Dean Witter Discover & Co
02/10/97 03/31/97 TheraTx Inc Own, op nursing care facilities Vencor Inc
02/11/97 06/13/97 AMISYS Managed Care Systems Pvd integrated systems svcs HBO & Co
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Value of Enter-
Trans- prise
Date Date Acquiror action Value
Announced Effective Target Name Business Description ($ mil) ($ mil)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
10/14/96 12/12/96 Thrifty Payless Holdings Inc Own, operate drug stores 2,394.00 2,367.73
10/15/96 06/03/97 Conrail Inc Investor group 10,435.90 12,532.43
10/15/96 12/23/96 FlightSafety International Property, casualty insurance co 1,518.10 1,555.16
10/17/96 01/30/97 OrNda HealthCorp Own, op hospitals 3,123.40 2,875.48
10/21/96 03/31/97 Detroit & Canada Tunnel Corp Investor group 36.50 33.33
10/23/96 04/16/97 Syratech Corp Pvd fund mgmt svcs 304.40 335.62
10/28/96 05/07/97 Cooper & Chyan Technology Inc Develop CAD software 474.80 452.04
10/28/96 01/15/97 Loctite Corp Mnfr, whl chemicals, detergents 1,289.10 2,118.28
10/28/96 05/29/97 Wireless Cable of Atlanta Pvd telecommunication svcs 44.70 37.95
10/30/96 04/08/97 Vons Cos Inc Own, op grocery stores 2,251.60 3,092.97
10/31/96 07/01/97 California Jockey Club/Bay Real estate investment trust 199.70 185.79
10/31/96 12/18/96 Kash N'Karry Food Stores Inc Own and operate supermarkets 347.10 342.27
11/04/96 02/27/97 Eckerd Corp Department stores 3,298.50 3,216.53
11/11/96 04/30/97 PHH Corp Own, op hotel franchises 1,809.50 6,273.96
11/12/96 06/12/97 Leslie's Poolmart Investor group 112.80 124.19
11/12/96 02/27/97 SQA Inc Dvlp component-based software 315.80 273.70
11/13/96 01/20/97 Medex Inc Mnfr engineered polymer prods 150.60 147.44
11/18/96 01/02/97 Sudbury Inc Ductile, gray iron castings 155.40 145.12
11/25/96 01/09/97 Opal Inc Mnfr wafer fabrication systems 189.60 146.57
11/25/96 06/18/97 PanEnergy Corp Electric utility 7,666.80 9,955.41
11/26/96 12/30/96 Armor All Products (McKesson) Manufacture household bleach 410.10 355.10
11/27/96 03/27/97 Central Tractor Farm & Country Investment company 56.70 172.74
11/27/96 12/27/96 Central Tractor Farm & Country Investment company 81.00 166.96
11/27/96 01/16/97 Milgray Electronics Inc Mnfr electronic, computer prods 100.00 135.18
11/27/96 03/19/97 Owen Healthcare Inc Whl pharmaceutical products 544.10 481.67
11/29/96 04/30/97 Chicago Dock and Canal Trust Real estate investment trust 177.90 176.49
11/29/96 01/06/97 ElectroStar Inc Mnfr fire protection systems 111.00 119.21
12/02/96 01/30/97 Easthay Inc Own, op variety stores 146.00 142.81
12/02/96 03/03/97 Health Images Inc Own, op outpatient surgery ctr. 263.70 259.67
12/05/96 02/26/97 Barefoot Inc Pvd mgmt svcs 230.90 246.11
12/05/96 03/27/97 Cavco Industries Inc Construct bldgs, RE dvlp firm 76.20 104.85
12/05/96 04/11/97 Public Storage Properties XIV Real estate investment trust 82.40 56.91
12/05/96 04/11/97 Public Storage Properties XV Real estate investment trusts 79.10 54.22
12/05/96 05/05/97 Santa Fe Pacific Gold Corp Gold, coal mining; oil, gas expl 2,505.50 2,862.14
12/05/96 01/10/97 Zycon Corp Mnfr computer circuit boards 211.70 240.90
12/11/96 02/21/97 Alexander & Alexander Services Insurance holding company 1,227.40 1,131.32
12/16/96 01/27/97 Eljer Industries Inc Mnfr environmental equipment 175.60 254.31
12/16/96 04/16/97 Paragon Group Inc Real estate investment trust 624.80 619.15
12/16/96 05/30/97 Pioneer Financial Services Insurance holding company 564.00 531.20
12/16/96 01/27/97 Tylan General Inc Mnfr analytical products 147.70 150.72
12/17/96 08/01/97 McDonnell Douglas Corp Mnfr aircraft, aerospace equip 13,359.00 15,830.06
12/19/96 03/25/97 IWC Resources Corp Electric, gas utility hldg co 290.60 418.56
12/24/96 04/16/97 Home Beneficial Corp Insurance holding company 665.10
12/30/96 05/29/98 LILCO Gas utility 4,725.50 8,325.51
01/07/97 02/25/97 American Medical Response Inc Pvd ambulance svcs 1,011.10 1,179.05
01/07/97 02/10/97 Bonray Drilling Corp Oil and gas exploration, prdn 12.70 13.61
01/13/97 04/25/97 OpenVision Technologies Inc Dvlp bus applications software 365.70 355.21
01/13/97 09/02/97 Zurich Reinsurance Centre Insurance holding company 319.00 932.99
01/14/97 04/01/97 Oxford Resources Corp Commercial bank 561.00 2,075.95
01/14/97 04/30/97 Tencor Instruments Inc Mnfr measuring devices 1,343.60 1,268.04
01/15/97 08/06/97 Value Health Inc Own, operate hospitals 1,132.30 1,007.30
01/16/97 02/28/97 Epic Design Technology Inc Develop automation software 455.40 435.64
01/16/97 05/30/97 Wellsford Residential Ppty Real estate investment trust 995.50 792.15
01/17/97 06/17/97 Avemco Corp Provide insurance services 246.80 295.32
01/17/97 04/11/97 Studio Plus Hotels Inc Own, op hotels 295.90 261.22
01/20/97 06/27/97 First USA Inc Bank holding company 7,304.30 7,972.55
01/20/97 04/08/97 Target Therapeutics Inc Manufacture catheters 1,218.30 1,183.39
01/21/97 06/26/97 InPhyNet Medical Management Pvd medical services to HMO's 369.70 364.33
01/21/97 07/09/97 Mafco Consolidated Grp (Mafco) Mnfr toilet preparations 116.80 980.32
01/22/97 03/05/97 Norand Corp Pvd oil, gas exploration svcs 320.80 316.14
01/23/97 05/19/97 Amphenol Corp Leverage buyout firm 1,390.40 1,385.99
01/23/97 06/02/98 ESELCO Inc Electric, gas utility; hldg co 74.30 95.65
01/27/97 03/07/97 Measurex Corp Mnfr automation, control sys 597.00 587.36
01/27/97 05/30/97 Revco DS Inc Own and operate drug stores 3,911.70 3,969.97
02/03/97 03/10/97 Kysor Industrial Corp Mnfr refrigeration equipment 359.20 385.36
02/05/97 5/31/97 Morgan Stanley Group Inc Securities brokerage firm 10,573.00 51,167.74
02/10/97 03/31/97 TheraTx Inc Provide healthcare services 378.20 539.63
02/11/97 06/13/97 AMISYS Managed Care Systems Dvlp healthcare software 170.60 146.52
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Premium
----------------------------------------------------------------------------------
Date Date 1 Day Prior 1 Day Prior 4 Weeks Prior 3 Months Prior 1 Year Prior
Announced Effective Target Name to Annc. Date to Annc. Date to Annc. Date to Annc. Date to Annc. Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10/14/96 12/12/96 Thrifty Payless Holdings Inc 26.91 28.66 37.18 62.23
10/15/96 06/03/97 Conrail Inc 61.97 60.28 60.28 61.40 74.24
10/15/96 12/23/96 FlightSafety International 13.96 10.80 10.80
10/17/96 01/30/97 OrNda HealthCorp 9.61 19.48 16.56 57.21 40.56
10/21/96 03/31/97 Detroit & Canada Tunnel Corp 64.89 74.19 54.29 110.73 64.89
10/23/96 04/16/97 Syratech Corp 21.91 28.00 29.29 62.03 31.28
10/28/96 05/07/97 Cooper & Chyan Technology Inc 2.54 1.73 31.84 63.54
10/28/96 01/15/97 Lucite Corp 31.89 36.70 34.81 33.33 41.86
10/28/96 05/29/97 Wireless Cable of Atlanta 89.88 80.83 80.83 83.04 20.57
10/30/96 04/08/97 Vons Cos Inc 26.80 21.52 25.71 115.49 32.96
10/31/96 07/01/97 California Jockey Club/Bay 87.23 88.57 103.08 300.61 268.67
10/31/96 12/18/96 Kash N'Karry Food Stores Inc 9.47 33.33 6.67 13.66 (7.96)
11/04/96 02/27/97 Eckerd Corp 21.21 28.44 29.63 67.66 56.42
11/11/96 04/30/97 PHH Corp 60.98 65.00 69.23 120.00 83.33
11/12/96 06/12/97 Leslie's Poolmart 26.09 31.82 31.82 5.45 13.73
11/12/96 02/27/97 SQA Inc 39.44 28.23 39.44 73.06
11/13/96 01/20/97 Medex Inc 54.10 57.98 66.74
11/18/96 01/02/97 Sudbury Inc 19.05 25.00 9.89 53.85 14.94
11/25/96 01/09/97 Opal Inc 52.58 64.44 105.56 270.00 23.33
11/25/96 06/18/97 PanEnergy 18.34 22.70 30.29 80.18 48.15
11/26/96 12/30/96 Armor All Products (McKesson) 9.09 13.97 13.97 4.60 27.27
11/27/96 03/27/97 Central Tractor Farm & Country 17.53 17.53 18.75 67.65 42.50
11/27/96 12/27/96 Central Tractor Farm & Country 15.46 15.46 16.67 64.71 40.00
11/27/96 01/16/97 Milgray Electronics Inc 8.40 16.99 20.57
11/27/96 03/19/97 Owen Healthcare Inc 64.89 100.86 87.25
11/29/96 04/30/97 Chicago Dock and Canal Trust 22.32 22.70 22.70 150.00 68.07
11/29/96 01/06/97 ElectroStar Inc 7.69 27.27 16.67 40.00
12/02/96 01/30/97 Easthay Inc 26.32 28.00 23.08
12/02/96 03/03/97 Health Images Inc 7.39 27.85 34.24 116.52 57.93
12/05/96 02/26/97 Barefoot Inc 25.49 28.00 42.22 31.96 60.00
12/05/96 03/27/97 Cavco Industries Inc 13.23 20.23 30.49 130.11 39.87
12/05/96 04/11/97 Public Storage Properties XIV 29.19 30.82 31.65 49.64 32.48
12/05/96 04/11/97 Public Storage Properties XV 29.19 28.40 32.48 46.48 34.19
12/05/96 05/05/97 Santa Fe Pacific Gold Corp 59.75 66.77 63.18 50.26 45.92
12/05/96 01/10/97 Zycon Corp 12.50 46.94 94.60 39.81 105.71
12/11/96 02/21/97 Alexander & Alexander Services 6.06 8.53 9.38 (16.67) 8.53
12/16/96 01/27/97 Eljer Industries Inc 77.78 84.62 90.10 146.15 140.00
12/16/96 04/16/97 Paragon Group Inc 9.71 12.25 14.00 7.29 19.61
12/16/96 05/30/97 Pioneer Financial Services 47.37 50.34 63.50
12/16/96 01/27/97 Tylan General Inc 39.13 26.73 26.73 13.27 16.36
12/17/96 08/01/97 McDonnell Douglas Corp 0.62 22.71 20.08 41.33 22.41
12/19/96 03/25/97 IWC Resources Corp 31.96 39.13 45.46 64.10 64.10
12/24/96 04/16/97 Home Beneficial Corp 2.80 39.29 50.00 56.00 56.78
12/30/96 05/29/98 LILCO 32.28 33.14 28.96 56.52 49.66
01/07/97 02/25/97 American Medical Response Inc 21.21 23.08 36.75 33.33 31.15
01/07/97 02/10/97 Bonray Drilling Corp 11.11 11.11 30.44 179.07 105.13
01/13/97 04/25/97 OpenVision Technologies Inc 43.67 46.46 50.86 46.49
01/13/97 09/02/97 Zurich Reinsurance Centre 17.07 18.52 11.63 20.50 18.03
01/14/97 04/01/97 Oxford Resources Corp 10.03 23.53 28.05 76.86 52.37
01/14/97 04/30/97 Tencor Instruments Inc 33.06 42.22 70.21 109.15 113.33
01/15/97 08/06/97 Value Health Inc 1.24 0.61 0 (22.64) 17.14
01/16/97 02/28/97 Epic Design Technology Inc (0.60) 8.52 23.63 23.01 30.09
01/16/97 05/30/97 Wellsford Residential Ppty 7.58 9.21 9.77
01/17/97 06/17/97 Avemco Corp 47.74 55.78 89.26 86.21 80.35
01/17/97 04/11/97 Studio Plus Hotels Inc 54.96 51.12 37.48 40.68 28.79
01/20/97 06/27/97 First USA Inc 43.16 53.05 50.85 126.89 80.64
01/20/97 04/08/97 Target Therapeutics Inc 63.65 65.86 93.68 50.39 76.90
01/21/97 06/26/97 InPhyNet Medical Management (0.80) 12.84 25.38 8.77 43.30
01/21/97 07/09/97 Mafco Consolidated Grp (Mafco) 23.50 23.50 27.62 69.62 36.04
01/22/97 03/05/97 Norand Corp 72.90 87.41 94.20 150.47 74.03
01/23/97 05/19/97 Amphenol Corp 12.43 16.85 26.06 16.85 31.65
01/23/97 06/02/98 ESELCO Inc 50.85 49.58 69.52
01/27/97 03/07/97 Measurex Corp 44.33 42.13 45.83 18.14 37.25
01/27/97 05/30/97 Revco DS Inc 7.57 11.47 17.69 50.79 40.73
02/03/97 03/10/97 Kysor Industrial Corp 16.22 17.01 24.64 79.17 48.28
02/05/97 5/31/97 Morgan Stanley Group Inc 11.08 12.80 13.81
02/10/97 03/31/97 TheraTx Inc 30.29 35.45 59.07 50.33 73.16
02/11/97 06/13/97 AMISYS Managed Care Systems 38.58 44.26 43.09 8.64 62.96
</TABLE>
Page F-8
<PAGE>
Merger Premiums to Market Value Analysis
Mergers with Target Price Equal to or Greater than $10 per Share
Announced and Completed 1/1/96-10/9/98
(continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date Date
Announced Effective Target Name Target Business Description Acquiror Name
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
02/13/97 05/20/97 Reflectone Inc Manufacture flight simulators British Aerospace Holdings
02/13/97 06/17/97 USLIFE Corp Life insurance company American General Corp
02/14/97 10/29/97 Horizon/CMS Healthcare Corp Pvd nursing care services HealthSouth Corp
02/14/97 09/17/97 UNC Inc Mnfr aircraft components Greenwich Air Services Inc
02/14/97 06/25/97 Winthrop Resources Corp Provide computer leasing svcs TCF Finl Corp, Minneapolis, MN
02/18/97 06/27/97 Destec Energy Inc Electric utility NGC Corp
02/20/97 12/09/97 NHP Inc (Apartment Investment) Own, op apartment buildings Apartment investment & Mgmt Co
02/24/97 07/01/97 Security-Connecticut Corp Insurance holding company ReliaStar Financial Corp, MN
02/25/97 08/05/98 Fina Inc Mnfr petroleum refined prods Petrofina SA
02/26/97 07/02/97 Petrolite Corp Mnfr fuel additives, waxes Baker Hughes Inc
02/26/97 06/12/97 US Robotics Corp Mnfr common products, systems 3Com Corp
02/27/97 06/13/97 Production Operators Corp Provide oil and gas field svcs Camco International Inc
02/28/97 08/01/97 Healthsource Inc Own and operate HMO's CIGNA Corp
03/03/97 05/30/97 BHC Financial Inc Provide data processing svcs Flserv Inc
03/07/97 08/01/97 Micro Bio-Medics Inc Whl, mnfr medical equip Henry Schein Inc
03/10/97 09/02/97 Greenwich Air Services Inc. Manufacture aircraft engines General Electric Co
03/14/97 06/26/97 Enterprise Systems Inc Develop hospital mgmt software HBO & Co
03/17/97 08/20/97 Heritage Media Corp Own, op radio and TV stations News Corp Ltd
03/19/97 07/11/97 American List Corp Pvd mail advertising svcs Snyder Communications Inc
03/20/97 06/17/97 Falcon Building Products Inc Manufacture air compressors InvestCorp
03/24/97 08/29/97 Community Bankshares, NH Bank holding company CFX Corp, Keene, new Hampshire
03/24/97 04/28/97 MDL Information Systems Pvd scientific info svcs Elsevier Science
03/24/97 08/05/97 OnTrak Systems Inc Mnfrs semiconductor cap equip Lam Research Corp
03/25/97 05/07/97 Foodbrands America Inc Produce sausages, prepared meat IBP Inc (Occidental Petroleum)
03/25/97 07/10/97 Phamis Inc Pvd integrated systems design IDX Systems Corp
03/26/97 09/03/97 Argyle Television Inc Own, op television stations Hearst Broadcasting Group
03/31/97 06/30/97 Cascade Communications Corp Mnfr frame relays Ascend Communications Inc
04/07/97 09/02/97 Alex.Brown Inc Securities brokerage firm Bankers Trust New York Corp
04/07/97 07/30/97 Pure Atria Corp Dvlp custom computer programs Rational Software Corp
04/08/97 06/12/97 Premiere Radio Networks Inc Own, op radio bdcstg stations Jacor Communications Inc
04/09/97 06/24/97 Public Storage Properties XVI Real estate investment trust Public Storage Inc
04/09/97 06/24/97 Public Storage Ppties XVIII Real estate investmeht trust Public Storage Inc
04/09/97 06/24/97 Public Storage Properties XIX Real estate investment trust Public Storage Inc
04/09/97 05/13/97 Stant Corp Mnfr, whl automotive parts Tomkins PLC
03/09/97 97/21/97 Tambrands Inc Mnfr feminine hygiene products Proctor & Gamble Co
04/14/97 11/12/97 APL Ltd Shipping, trucking company Neptune Orient Lines Ltd
04/14/97 09/03/97 United Waste Systems Inc Provide waste management svcs USA Waste Services Inc
04/14/97 01/05/98 Wyndham Hotel Corp Own and operate hotels Patriot Amer Hosp/Wyndham Intl
04/16/97 01/30/98 Steck Vaughn Publishing Corp Publish books, magazines Harcourt General Inc
04/17/97 07/14/97 Drilex International Inc Pvd prod, svcs used in drilling Baker Hughes Inc
04/18/97 04/21/97 Vitalink Pharmacy Services Inc Pvd health and allied svcs Manor Care Inc
04/21/97 05/28/97 Goulds Pumps Inc Mnfr centrifugal pumps ITT Industries Inc
04/21/97 06/10/97 National Education Corp Vocational training services Harcourt General Inc
04/22/97 09/04/97 International Family Ent Inc Provide cable television svcs Fox Kids Worldwide Inc.
04/23/97 06/25/97 VeriFone Inc Electronic funds transfer mach Hewlett-Packard Co
04/30/97 06/03/97 GKN Sinter Metals Inc(GKN PLC) Mnfr automotive, metal parts GKN PLC
05/01/97 07/30/97 David White Inc Mnfr, whl surveying instruments Choucroute Partners
05/05/97 08/13/97 Fort Howard Corp Mnfr sanitary tissue products James River Corp of Virginia
05/05/97 08/01/97 Logicon Inc Pvd computer svcs to military Northrop Grumman Corp
05/05/97 08/19/97 Riser Foods Inc Own, op grocery stores Giant Eagle Inc
05/05/97 06/13/97 Vivra Inc Provide home health care svcs Incentive AB
05/06/97 08/15/97 BBN Corp Mnfr computer integrated sys GTE Corp
05/06/97 07/22/97 BW/IP Inc Mnfr fluid transfer equip Durco International Inc
05/06/97 01/05/98 Physicians Health Services Inc Own and operate HMO's Foundation Health Systems Inc
05/06/97 07/25/97 Varsity Spirit Pvd cheerleading training svcs Riddell Sports Inc
05/07/97 06/03/98 Reliable Life Insurance Co Insurance company Unitrin Inc
05/08/97 11/04/97 Living Centers of America Inc Pvd long-term health care svcs Apollo Management LP
05/12/97 10/16/97 Dynamics Corp of America Mnfr electrical appliances CTS Corp
05/12/97 09/09/97 Smith's Food & Drug Centers Own and operate supermarkets Fred Meyer Inc
05/13/97 08/26/97 Aurum Software Inc Dvlp sales, mktg info software Baan Co NV
05/13/97 08/28/97 Inbrand Corp Mfnr incontinence products Tyco International Ltd
05/14/97 11/18/97 Enron Global Power & Pipelines Pvd gas transmission svcs Enron Corp
05/20/97 09/02/97 Keystone International Inc Mnfr indi flow control prod Tyco International Ltd
05/21/97 08/14/97 Howell Industries Inc Mnfr automotive parts Oxford Automotive Inc
05/21/97 05/04/98 KU Energy Corp Electric utility holding co LG&E Energy Corp
05/22/97 07/31/97 Biopsys Medical Inc Mnfr surgical, medical instr Johnson & Johnson
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Value of Enter-
Trans- prise
Date Date Acquiror action Value
Announced Effective Target Name Business Description ($ mil) ($ mil)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
02/13/97 05/20/97 Reflectone Inc Whl aircraft ircraft, equip 41.10 98.00
02/13/97 06/17/97 USLIFE Corp Insurance holding company 2,374.40 2,353.34
02/14/97 10/29/97 Horizon/CMS Healthcare Corp Own,op outpatient surgery ctr 1,651.30 1,612.88
02/14/97 09/17/97 UNC Inc Manufacture aircraft engines 442.70 752.15
02/14/97 06/25/97 Winthrop Resources Corp Savings and loan 334.70 350.73
02/18/97 06/27/97 Destec Energy Inc Wholesale natural gas products 1,222.40 1,235.07
02/20/97 12/09/97 NHP Inc (Apartment Investment) Real estate investment trust 114.50 370.58
02/24/97 07/01/97 Security-Connecticut Corp Insurance company 545.40 503.52
02/25/97 08/05/98 Fina Inc Produce, whl petroleum 257.00 2,427.11
02/26/97 07/02/97 Petrolite Corp Mnfr oil, gas field machinery 710.90 709.81
02/26/97 06/12/97 US Robotics Corp Pvd network computer svcs 6,510.70 6,596.65
02/27/97 06/13/97 Production Operators Corp Mnfr oil, gas field equipment 609.60 616.80
02/28/97 08/01/97 Healthsource Inc Insurance company 1,652.70 1,545.42
03/03/97 05/30/97 BHC Financial Inc Pvd finl data processing svcs 220.60 247.84
03/07/97 08/01/97 Micro Bio-Medics Inc Whl med supplies 136.10 113.12
03/10/97 09/02/97 Greenwich Air Services Inc. Electrical, construction prod 519.20 789.39
03/14/97 06/26/97 Enterprise Systems Inc Dvlp healthcare software 275.20 254.54
03/17/97 08/20/97 Heritage Media Corp Publish newspapers, magazines 1,351.80 1,348.41
03/19/97 07/11/97 American List Corp Pvd outsources marketing svcs 117.10 117.72
03/20/97 06/17/97 Falcon Building Products Inc Investor group 584.50 496.47
03/24/97 08/29/97 Community Bankshares, NH Savings and loan 101.60 514.34
03/24/97 04/28/97 MDL Information Systems Publish scientific journals 310.70 299.21
03/24/97 08/05/97 OnTrak Systems Inc Mnfr equip to mnfr semiconduct 217.90 200.19
03/25/97 05/07/97 Foodbrands America Inc Produce beef and pork products 657.50 634.74
03/25/97 07/10/97 Phamis Inc Mnfr health care info systems 142.80 140.39
03/26/97 09/03/97 Argyle Television Inc Own, op radio stations 322.20 487.37
03/31/97 06/30/97 Cascade Communications Corp Dvlp comp network solutions 3,529.30 3,445.04
04/07/97 09/02/97 Alex Brown Inc Bank holding company 2,077.40 2,055.27
04/07/97 07/30/97 Pure Atria Corp Dvlp component-based software 958.40 949.50
04/08/97 06/12/97 Premiere Radio Networks Inc Own, op radio bdcstg stations 208.90 155.81
04/09/97 06/24/97 Public Storage Properties XVI Real estate investment trust 84.20 82.14
04/09/97 06/24/97 Public Storage Ppties XVIII Real estate investment trust 78.60 82.66
04/09/97 06/24/97 Public Storage Properties XIX Real estate investment trust 67.90 66.65
04/09/97 05/13/97 Stant Corp Mnfr, whl plumbing fixtures 574.00 593.71
03/09/97 97/21/97 Tambrands Inc Mnfr household prod, oil, coffee 2,003.90 1,978.69
04/14/97 11/12/97 APL Ltd Pvd deep sea oil transp svcs 878.50 1,482.22
04/14/97 09/03/97 United Waste Systems Inc Pvd waste disposal services 1,682.20 1,899.63
04/14/97 01/05/98 Wyndham Hotel Corp Real estate investment trust 773.10 731.68
04/16/97 01/30/98 Steck Vaughn Publishing Corp Own, op movie theaters, stores 40.30 221.36
04/17/97 07/14/97 Drilex Internationsl Inc Mnfr oil, gas field machinery 120.10 133.64
04/18/97 04/21/97 Vitalink Pharmacy Services Inc Own, op nursing homes, hotels 30.00 278.46
04/21/97 05/28/97 Goulds Pumps Inc Mnfr brakes and chassis sys 922.10 913.49
04/21/97 06/10/97 National Education Corp Own, op movie theaters, stores 776.10 874.09
04/22/97 09/04/97 International Family Ent Inc Pvd motion picture prodn svcs 1,862.90 1,903,50
04/23/97 06/25/97 VeriFone Inc Mnfr computers, testing equip 1,245.10 1,142.30
04/30/97 06/03/97 GKN Sinter Metals Inc(GKN PLC) Mnfr, whl auto parts, metals 469.70 523.10
05/01/97 07/30/97 David White Inc Investment company 5.90 7.47
05/05/97 08/13/97 Fort Howard Corp Mnfr paper, paper-related prods 5,682.60 5,734.86
05/05/97 08/01/97 Logicon Inc Aircraft, aerospace products 1,027.50 949.94
05/05/97 08/19/97 Riser Foods inc Whl, retail grocery prods 468.50 415.19
05/05/97 06/13/97 Vivra Inc Mnfr medical instr, ind epuip 1,660.50 1,768.29
05/06/97 08/15/97 BBN Corp Pvd telecommunicatins svcs 713.80 678.34
05/06/97 07/22/97 BW/IP Inc Mnfr machinery, metal castings 530.70 537.88
05/06/97 01/05/98 Physicians Health Services Inc Own, op HMO's; holding company 268.20 231.41
05/06/97 07/25/97 Varsity Spirit Manufacture football equip 91.00 89.64
05/07/97 06/03/98 Reliable Life Insurance Co Insurance company 261.10 145.97
05/08/97 11/04/97 Living Centers of America Inc Investment management services 1,048.20 1,126.82
05/12/97 10/16/97 Dynamics Corp of America Mnfr electronic components 244.60 255.74
05/12/97 09/09/97 Smith's Food & Drug Centers Own, operate department stores 2,018.00 2,074.87
05/13/97 08/26/97 Aurum Software Inc Develop software 259.90 218.70
05/13/97 08/28/97 Inbrand Corp Mnfr fire protction systems 322.80 367.43
05/14/97 11/18/97 Enron Global Power & Pipelines Own, operate gas pipelines 428.00 866.48
05/20/97 09/02/97 Keystone International Inc Mnfr fire protection systems 1,361.50 1,426.76
05/21/97 08/14/97 Howell Industries Inc Mnfr engineered metal prods 23.00 19.05
05/21/97 05/04/98 KU Energy Corp Electric utility 1,539.40 2,112.89
05/22/97 07/31/97 Biopsys Medical Inc Mnfr medical equip and prods 303.50 293.85
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Premium
----------------------------------------------------------------------------------
Date Date 1 Day Prior 1 Day Prior 4 Weeks Prior 3 Months Prior 1 Year Prior
Announced Effective Target Name to Annc. Date to Annc. Date to Annc. Date to Annc. Date to Annc. Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
02/13/97 05/20/97 Reflectone Inc 20.00 18.52 25.49 33.33 28.00
02/13/97 06/17/97 USLIFE Corp 20.96 22.80 43.26 57.30 68.33
02/14/97 10/29/97 Horizon/CMS Healthcare Corp 27.65 40.04 36.08 (0.66) (32.28)
02/14/97 09/17/97 UNC Inc 37.93 41.18 36.36 96.72 66.67
02/14/97 06/25/97 Winthrop Resources Corp 7.65 20.00 23.03
02/18/97 06/27/97 Destec Energy Inc 82.32 80.42 63.40 73.20 37.46
02/20/97 12/09/97 NHP Inc (Apartment Investment) 28.26 25.21 16.86 12.69 16.00
02/24/97 07/01/97 Security-Connecticut Corp 43.65 45.10 36.38 105.22 57.86
02/25/97 08/05/98 Fina Inc 19.70 18.52 21.52 23.39 25.33
02/26/97 07/02/97 Petrolite Corp 62.67 83.46 78.10 128.04 38.64
02/26/97 06/12/97 US Robotics Corp 11.38 13.22 0.37 16.35 (6.80)
02/27/97 06/13/97 Production Operators Corp 22.90 13.02 15.93 79.22 25.65
02/28/97 08/01/97 Healthsource Inc 28.89 32.82 64.15 107.14 150.96
03/03/97 05/30/97 BHC Financial Inc 67.50 60.00 82.31 92.81 112.70
03/07/97 08/01/97 Micro Bio-Medics Inc 12.19 12.19 10.44 14.93 3.94
03/10/97 09/02/97 Greenwich Air Services Inc. 21.57 33.33 34.78 (16.78) 30.53
03/14/97 06/26/97 Enterprise Systems Inc 15.29 13.75 30.00 16.88 51.67
03/17/97 08/20/97 Heritage Media Corp 69.07 72.63 69.07 21.03 45.13
03/19/97 07/11/97 American List Corp 17.32 28.05 8.81 27.27 (0.47)
03/20/97 06/17/97 Falcon Building Products Inc 43.43 49.47 52.69 97.22 24.56
03/24/97 08/29/97 Community Bankshares, NH 63.28 64.11 54.68 121.42 102.05
03/24/97 04/28/97 MDL Information Systems 85.51 43.82 54.22 50.59 79.02
03/24/97 08/05/97 OnTrak Systems Inc -0.85 2.96 13.92 81.49 62.24
03/25/97 05/07/97 Foodbrands America Inc 47.40 50.97 61.38 36.64 71.74
03/25/97 07/10/97 Phamis Inc 18.93 23.00 26.47 30.14 95.22
03/26/97 09/03/97 Argyle Television Inc 15.22 16.48 14.60 22.54 8.16
03/31/97 06/30/97 Cascade Communications Corp 28.28 46.70 21.08 (18.89) (33.97)
04/07/97 09/02/97 Alex.Brown Inc 65.00 50.04 17.70
04/07/97 07/30/97 Pure Atria Corp 18.54 23.31 23.77 (40.10) (23.49)
04/08/97 06/12/97 Premiere Radio Networks Inc 17.37 19.23 19.23 36.58 32.96
04/09/97 06/24/97 Public Storage Properties XVI 6.01 5.32 2.62 17.71 2.62
04/09/97 06/24/97 Public Storage Ppties XVIII 4.97 7.12 2.90 15.00 (0.38)
04/09/97 06/24/97 Public Storage Properties XIX 4.89 3.25 3.25 16.96 (2.82)
04/09/97 05/13/97 Stant Corp 29.32 48.28 49.57 79.17 40.98
03/09/97 97/21/97 Tambrands Inc 8.40 14.94 14.94 4.71 21.95
04/14/97 11/12/97 APL Ltd 55.81 65.43 42.55 43.32 40.31
04/14/97 09/03/97 United Waste Systems Inc 0.71 1.05 (1.25) 53.09 13.95
04/14/97 01/05/98 Wyndham Hotel Corp 48.02 44.52 48.93 29.23
04/16/97 01/30/98 Steck Vaughn Publishing Corp 21.65 32.58 24.21 55.26 27.57
04/17/97 07/14/97 Drilex International Inc 31.44 37.88 59.82 31.44
04/18/97 04/21/97 Vitalink Pharmacy Services In 14.29 8.11 (4.19) (8.05) (17.53)
04/21/97 05/28/97 Goulds Pumps Inc 61.75 57.45 60.87 68.18 51.02
04/21/97 06/10/97 National Education Corp 22.63 54.13 40.00 54.13 48.67
04/22/97 09/04/97 International Family Ent Inc 94.44 95.80 107.41 61.38 15.94
04/23/97 06/25/97 VeriFone Inc 67.64 50.19 43.77 24.69 34.67
04/30/97 06/03/97 GKN Sinter Metals Inc (GKN PLC) 37.04 38.32 32.74
05/01/97 07/30/97 David White Inc 11.63 14.29 18.52 (4.00) 52.38
05/05/97 08/13/97 Fort Howard Corp 16.31 27.92 43.30 92.95 33.18
05/05/97 08/01/97 Logicon Inc 75.68 84.23 102.65 134.48 102.66
05/05/97 08/19/97 Riser Foods inc 11.63 29.23 26.79 115.38 28.24
05/05/97 06/13/97 Vivra Inc 26.09 41.77 35.70 23.90 18.24
05/06/97 08/15/97 BBN Corp 26.09 32.57 64.54 5.45 26.09
05/06/97 07/22/97 BW/IP Inc (5.48) 14.15 18.72 (10.60) 11.58
05/06/97 01/05/98 Physicians Health Services In 23.50 26.97 51.68 8.65 46.75
05/06/97 07/25/97 Varsity Spirit 30.35 28.14 23.93 26.00 26.00
05/07/97 06/03/98 Reliable Life Insurance Co 51.11 51.11 52.06
05/08/97 11/04/97 Living Centers of America Inc 17.82 22.73 41.49 9.46 36.71
05/12/97 10/16/97 Dynamics Corp of America 91.27 94.17 112.70 156.32 107.55
05/12/97 09/09/97 Smith's Food & Drug Centers 9.93 16.48 26.99 63.23 62.85
05/13/97 8/26/97 Aurum Software Inc 32.99 40.38 55.84 9.19
05/13/97 08/28/97 Inbrand Corp 69.98 78.34 107.22 (81.87) (38.18)
05/14/97 11/18/97 Enron Global Power & Pipelin 11.83 13.70 19.74 38.08 12.30
05/20/97 09/02/97 Keystone International Inc 84.19 85.31 102.49 73.73 92.30
05/21/97 08/14/97 Howell Industries Inc 28.70 30.40 32.14 26.50 (21.90)
05/21/97 05/04/98 KU Energy Corp 34.01 31.84 35.69 38.59 32.93
05/22/97 07/31/97 Biopsys Medical Inc 6.99 6.99 22.44 17.23 (6.61)
</TABLE>
Page F-9
<PAGE>
Merger Premiums to Market Value Analysis
Mergers with Target Price Equal to or Greater than $10 per Share
Announced and Completed 1/1/96-10/9/98
(continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date Date
Announced Effective Target Name Target Business Description Acquiror Name
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
05/22/97 07/09/98 Chaparral Steel Co (Texas Ind) Mnfr primary steel products Texas Industries Inc
05/22/97 11/20/97 Mail Boxes, Etc Pvd franchised postal services US Office Products Co
05/23/97 10/06/97 Palmer Wireless Inc Pvd telephone services Price Communications Corp
05/27/97 08/08/97 Alamco Inc Oil & gas exploration, prod Columbia Natural Resources Inc
05/27/97 12/18/97 HFS Inc Own, op hotel franchises CUC International Inc
05/28/97 02/10/98 CommNet Cellular Inc Cellular telephone services Blackstone Capital Partners
05/28/97 07/03/97 Fibreboard Corp Mnfr fibreboard, paperboard Owens Corning
06/02/97 07/15/97 Acordia Inc (Anthem Inc) Pvd insurance brokerage svcs Anthem Inc
06/03/97 01/15/98 Faulding Inc (FH Faulding & Co) Mnfr pharmaceuticals FH Faulding & Co Ltd
06/04/97 07/28/97 Maxis Inc Develop education software Electronic Arts Inc
06/06/97 10/14/97 Telco Communications Group Inc Pvd switch-based telecom svcs Excel Communications Inc
06/09/97 10/01/97 American States Financial Corp Fire and marine insurance co SAFECO Corp
06/09/97 09/12/97 Amrion Inc Own, op food stores Whole Foods Market Inc
06/09/97 07/15/97 Prime Service Inc Pvd const equip rental svcs Atlas Copco North America Inc
06/10/97 09/30/97 Numar Corp Mnfr imaging logging equip Halliburton Co
06/11/97 10/31/97 Pacific Greystone Corp Pvd general contracting svcs Lennar Corp
06/12/97 10/01/97 Giddings & Lewis Inc Mnfr automated machine tools Thyssen AG
06/13/97 03/26/97 Bally's Grand Inc Own and operate casino hotels Hilton Hotels Corp
06/16/97 08/29/97 Core Industries Inc Manufacture electronic equip United Dominion Industries Ltd
06/16/97 10/10/97 Multicare Cos Inc Own, op nursing care facilities Genesis Eldercare
06/17/97 07/24/97 McFarland Energy Inc Oil and gas exploration, prodn Monterey Resources Inc
06/17/97 07/25/97 Seda Specialty Packaging Corp Mnfr specialty packaging prods CCL Industries Inc
06/19/97 08/15/97 Advanced Logic Research Inc Mnfr micro computer systems Gateway 2000 Inc
06/20/97 03/30/98 Wheelabrator Technologies Inc Mnfr laboratory, medical equip Waste Management Inc
06/23/97 10/17/97 Integon Corp Insurance holding company General Motors Acceptance (GM)
06/23/97 08/29/97 Tandem Computer Inc Mnfr computers, network systems Compaq Computer Corp
06/24/97 10/14/97 American Exploration Co Oil and gas exploration, prodn Louis Dreyfus Natural Gas
06/24/97 09/29/97 SMT Health Services Inc Operate and outpatient facilities Three Rivers Holding Corp
06/26/97 11/26/97 Rhone-Poulenc Rorer Inc Manufacture pharmaceuticals Rhone-Poulenc SA
06/30/97 10/09/97 Fusion Systems Corp Mnfr curing sys, semiconductors Eaton Corp
06/30/97 12/23/97 Rykoff-Sexton Inc Wholesale grocery products JP Foodservice Inc
09/23/97 American Filtrona Corp Mnfr bonded fiber Bunzl PLC
07/03/97 08/05/97 Duty Free International Inc Own, op duty free shops BAA PLC
07/03/97 08/06/97 Wyle Electronics Whl high tech electronic prods Raab Karcher AG (VEBA AG)
07/07/97 11/06/97 Cairn Energy USA Inc Oil and gas exploration, prodn Meridian Resource Corp
07/07/97 10/21/97 RoTech Medical Corp Pvd home health care svcs Integrated Health Services Inc
07/08/97 10/24/97 Equitable of Iowa Cos Life insurance company ING Groep NV
07/09/97 09/23/97 Control Data Systems Inc Mnfr computers, peripherals CDSI Holding Corp
07/09/97 12/23/97 Seaman Furniture Co Own, op ret furniture stores Investor Group
07/10/97 11/18/97 Kinetic Concepts Inc Mnfr medical treatment tables Investor Group
07/10/97 12/31/97 Reading & Bates Corp Pvd oil, gas drilling services Falcon Drilling Co
07/15/97 10/02/97 DH Technology Inc Mnfr, whl computer printers Axiohn SA
07/15/97 10/28/97 Intl Imaging Materials Mnfr thermal transfer ribbons Paxar Corp
07/15/97 09/04/97 Ply-Gem Industries Inc Manufacture wood products Nortek Inc
07/17/97 10/22/97 Louisiana Land & Exploration Oil and gas exploration, prodn Burlington Resources Inc
07/17/97 09/29/97 Octel Communications Corp Mnfr voice processing systems Lucent Technologies Inc
07/23/97 12/18/97 Alliance Imaging Inc Pvd diagnostic imaging svcs Newport Investment LLC
07/24/97 09/15/97 Nellcor Puritan-Bennett Mnfr electn patient monitors Mallinckrodt Inc
07/28/97 02/02/98 Chips and Technologies Inc Design, with integrated circuit Intel Corp
07/28/97 11/17/97 Cyrix Corp Mnfr PC units, microprocessors National Semiconductor Corp
07/28/97 12/22/97 Freeport-McMoRan Inc Own, op chem, fertilizer mines IMC Global Inc
07/28/97 10/08/97 Regency Health Services Inc Pvd nursing services Sun Healthcare Group Inc
07/30/97 09/18/97 Amdahl Corp Develop computer sys, software Fujitsu Ltd
07/30/97 02/02/98 Plasti-Line Inc Mnfr illuminated outdoor signs PL Holdings Corp
07/31/97 09/24/97 Bucyrus International Inc Mnfr surface mining machinery American Industrial Partners
07/31/97 10/03/97 Delaware Otsego Corp Own and operate railroad Investor Group
07/31/97 10/23/97 Sterling House Corp Own, op nursing homes Alternative Living Services
08/04/97 10/24/97 Columbus Realty Trust Real estate investment trust Post Properties Inc
08/04/97 12/23/97 Perkins Family Restaurant LP Own, op franchised restaurants Restaurant Co
08/04/97 11/12/97 Sullivan Dental Products Inc Wholesale dental products Henry Schein Inc
08/08/97 12/22/97 Titan Holdings Inc Auto, property, casualty ins co USF&G Corp
08/11/97 12/19/97 Amscan Holdings Inc Whl paper, plastic party goods Confetti Acquisition Inc
08/11/97 09/30/97 National Sanitary Supply Co Sanitary maintenance supplies Unisource Worldwide Inc
08/11/97 12/22/97 Vacation Break USA Inc Real estate development firm Fairfield Communities Inc
08/12/97 09/17/97 Isomedix Inc Pvd contract sterilization svc Steris Corp
08/12/97 03/03/98 LIN Television Corp Own, op TV bdcstg stations Hicks Muse Tate & Furst Inc.
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Value of Enter-
Trans- prise
Date Date Acquiror action Value
Announced Effective Target Name Business Description ($ mil) ($ mil)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
05/22/97 07/09/98 Chaparral Steel Co (Texas Inc) Mnfr cement, steel products 72.80 519.31
05/22/97 11/20/97 Mail Boxes, Etc Whl, retail office supplies 354.80 324.21
05/23/97 10/06/97 Palmer Wireless Inc Own, op TV and radio stations 870.40 865.52
05/27/97 08/08/97 Alamco Inc Operate natural gas pipeline 102.80 94.43
05/27/97 12/18/97 HFS Inc Provide discount club svcs 11,342.90 11,759.19
05/28/97 02/10/98 CommNet Cellular Inc Investment bank 631.20 745.35
05/28/97 07/03/97 Fibreboard Corp Mnfr glass fiber products 631.20 478.00
06/02/97 07/15/97 Acordia Inc (Anthem Inc) Insurance company 193.20 633.96
06/03/97 01/15/98 Faulding Inc (FH Faulding & Co) Mnfr, whl drugs, toiletries 77.30 206.01
06/04/97 07/28/97 Maxis Inc Develop, wholesale software 127.50 116.95
06/06/97 10/14/97 Telco Communications Group Inc Pvd telephone commun svcs 1,046.50 1,017.65
06/09/97 10/01/97 American States Financial Corp Provide insurance services 3,127.10 3,110.92
06/09/97 09/12/97 Amrion Inc Own, op natural foods stores 152.60 152.21
06/09/97 07/15/97 Prime Service Inc Mnfr compressors, machinery 1,112.00 1,110.54
06/10/97 09/30/97 Numar Corp Mnfr oil field machinery 341.60 336.54
06/11/97 10/31/97 Pacific Greystone Corp Construct residential bldgs 459.30 452.05
06/12/97 10/01/97 Giddings & Lewis Inc Manufacture malleable iron 703.00 712.16
06/13/97 03/26/97 Bally's Grand Inc Own, operate hotels 42.60 667.81
06/16/97 08/29/97 Core Industries Inc Mnfr structural metal 275.20 317.27
06/16/97 10/10/97 Multicare Cos Inc Own, op geriatric facilities 1,249.10 1,316.49
06/17/97 07/24/97 McFarland Energy Inc Oil and gas exploration, prodn 111.20 103.59
06/17/97 07/25/97 Seda Specialty Packaging Corp Mnfr pvd specialty packaging 182.60 192.18
06/19/97 08/15/97 Advanced Logic Research Inc Mnfr personal computers 206.80 148.06
06/20/97 03/30/98 Wheelabrator Technologies Inc Pvd chemical waste mgmt svcs 869.70 3,191.55
06/23/97 10/17/97 Integon Corp Provide business finance svcs 517.10 668.02
06/23/97 08/29/97 Tandem Computer Inc Manufacture personal computers 2,780.40 2,873.86
06/24/97 10/14/97 American Exploration Co Oil & gas exploration, prodn 275.50 305.83
06/24/97 09/29/97 SMT Health Services Inc Investment company 75.60 83.10
06/26/97 11/26/97 Rhone-Poulenc Rorer Inc Mnfr chemicals and cosmetics 4,831.60 16,358.07
06/30/97 10/09/97 Fusion Systems Corp Manufacture automotive parts 308.60 278.55
06/30/97 12/23/97 Rykoff-Sexton Inc Wholesale groceries 1,435.90 1,172.90
09/23/97 American Filtrona Corp Whl, mnfr paper, constn material 183.50 137.24
07/03/97 08/05/97 Duty Free International Inc Own, op airports, airfields 674.60 751.31
07/03/97 08/06/97 Wyle Electronics Wholesale petroleum products 633.00 751.33
07/07/97 11/06/97 Cairn Energy USA Inc Oil and gas exploration, prodn 233.60 279.72
07/07/97 10/21/97 RoTech Medical Corp Pvd specialty healthcare svcs 918.90 828.27
07/08/97 10/24/97 Equitable of Iowa Cos Insurance Company 2,626.40 2,586.78
07/09/97 09/23/97 Control Data Systems Inc Investment holding company 273.90 176.78
07/09/97 12/23/97 Seaman Furniture Co Investor Group 45.60 130.12
07/10/97 11/18/97 Kinetic Concepts Inc Investor group 776.70 814.20
07/10/97 12/31/97 Reading & Bates Corp Pvd contract drilling svcs 2,587.00 2,680.96
07/15/97 10/02/97 DH Technology Inc Mnfr, whl computer printers 169.50 167.60
07/15/97 10/28/97 Intl Imaging Materials Mnfr label systems 244.40 267.86
07/15/97 09/04/97 Ply-Gem Industries Inc Mnfr AC, building, wood prods 476.30 388.57
07/17/97 10/22/97 Louisiana Land & Exploration Oil and gas exploration, prodn 2,954.30 2,911.54
07/17/97 09/29/97 Octel Communications Corp Mnfr telecom equip, software 1,824.80 1,772.96
07/23/97 12/18/97 Alliance Imaging Inc Investment company 114.20 205.49
07/24/97 09/15/97 Nellcor Puritan-Bennett Mnfr diagnostic products 1,858.40 1,833.05
07/28/97 02/02/98 Chips and Technologies Inc Mnfr, whl microprocessors 422.90 391.35
07/28/97 11/17/97 Cyrix Corp Mnfr semiconductors, circuits 566.40 623.21
07/28/97 12/22/97 Freeport-McMoRan Inc Mnfr phosphate fertilizers 790.70 1,233.54
07/28/97 10/08/97 Regency Health Services Inc Pvd long-term healthcare svcs 587.90 570.89
07/30/97 09/18/97 Amdahl Corp Mnfr semiconductors, computers 924.80 1,563.05
07/30/97 02/02/98 Plasti-Line Inc Investor group formed by mgmt 30.70 62.00
07/31/97 09/24/97 Bucyrus International Inc Pvd fund mgmt & fin adv svcs 193.30 262.15
07/31/97 10/03/97 Delaware Otsego Corp Investor group 53.40 62.54
07/31/97 10/23/97 Sterling House Corp Pvd residential care svcs 170.00 151.79
08/04/97 10/24/97 Columbus Realty Trust Real estate investment trust 600.00 565.32
08/04/97 12/23/97 Perkins Family Restaurant LP Own, operate restaurants 76.30 215.01
08/04/97 11/12/97 Sullivan Dental Products Inc Whl med supplies 312.80 314.55
08/08/97 12/22/97 Titan Holdings Inc Insurance holding company 278.10 277.43
08/11/97 12/19/97 Amscan Holdings Inc Investment company 334.90 390.42
08/11/97 09/30/97 National Sanitary Supply Co Wholesale printing paper 155.90 149.31
08/11/97 12/22/97 Vacation Break USA Inc Construct vacation resorts 178.10 239.94
08/12/97 09/17/97 Isomedix Inc Mnfr sterile processing sys 139.80 136.20
08/12/97 03/03/98 LIN Television Corp Leverage buyout firm 1,960.60 1,988.60
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Premium
----------------------------------------------------------------------------------
Date Date 1 Day Prior 1 Week Prior 4 Weeks Prior 3 Months Prior 1 Year Prior
Announced Effective Target Name to Annc. Date to Annc. Date to Annc. Date to Annc. Date to Annc. Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
05/22/97 07/09/98 Chaparral Steel Co (Texas Ind) 20.39 25.25 29.17 5.08 29.17
05/22/97 11/20/97 Mail Boxes, Etc 39.20 40.99 38.31 52.84 33.27
05/23/97 10/06/97 Palmer Wireless Inc 45.08 55.56 64.71 (15.15) 27.27
05/27/97 08/08/97 Alamco Inc 7.69 11.50 16.67 44.83 11.50
05/27/97 12/18/97 HFS Inc 5.93 2.99 5.23 (3.97) (12.17)
05/28/97 02/10/98 CommNet Cellular Inc 21.78 28.64 39.81 449.62 605.88
05/28/97 07/03/97 Fibreboard Corp 15.79 22.22 49.66 120.00 65.41
06/02/97 07/15/97 Acordia Inc (Anthem Inc) 12.68 11.50 25.98 317.39 207.69
06/03/97 01/15/98 Faulding Inc (FH Faulding & Co) 25.58 22.73 45.95 111.76 56.52
06/04/97 07/28/97 Maxis Inc 2.27 2.27 40.63 (50.55) 18.42
06/06/97 10/14/97 Telco Communications Group Inc 32.91 23.77 26.44 61.32
06/09/97 10/01/97 American States Financial Corp 45.74 48.62 57.32 104.35 41.89
06/09/97 09/12/97 Amrion Inc 8.12 19.22 47.04 68.37 43.69
06/09/97 07/15/97 Prime Service Inc 28.64 29.95 31.28 60.00
06/10/97 09/30/97 Numar Corp 90.94 99.35 95.65 126.40 115.62
06/11/97 10/31/97 Pacific Greystone Corp 75.27 83.30 98.45 110.67
06/12/97 10/01/97 Giddings & Lewis Inc 10.53 9.80 0.60 24.44 46.09
06/13/97 03/26/97 Bally's Grand Inc 27.88 29.85 31.06 32.70 66.14
06/16/97 08/29/97 Core Industries Inc 26.58 37.93 49.25 76.99 60.00
06/16/97 10/10/97 Multicare Cos Inc 9.27 13.71 34.94 38.27 55.56
06/17/97 07/24/97 McFarland Energy Inc 11.58 41.33 44.78 89.04 57.87
06/17/97 07/25/97 Seda Specialty Packaging Corp 31.82 36.47 52.63 40.61 68.12
06/19/97 08/15/97 Advanced Logic Research Inc 29.17 30.53 34.78 87.88 67.57
06/20/97 03/30/98 Wheelabrator Technologies Inc 26.92 28.16 30.69 4.76 15.79
06/23/97 10/17/97 Integon Corp 173.68 92.59 74.79 30.00 73.33
06/23/97 08/29/97 Tandem Computer Inc 49.33 51.86 51.86 113.33 99.11
06/24/97 10/14/97 American Exploration Co 12.99 15.03 21.60 28.97 41.87
06/24/97 09/29/97 SMT Health Services Inc 4.44 2.17 8.05 43.69 44.62
06/26/97 11/26/97 Rhone-Poulenc Rorer Inc 22.11 22.79 29.33 44.51 29.12
06/30/97 10/09/97 Fusion Systems Corp 11.43 9.86 24.30 57.58 50.00
06/30/97 12/23/97 Rykoff-Sexton Inc 24.40 26.00 27.65 69.81 38.50
09/23/97 American Filtrona Corp 8.82 2.24 3.38 53.79 3.38
07/03/97 08/05/97 Duty Free International Inc 39.13 50.00
07/03/97 08/06/97 Wyle Electronics 16.79 38.41 35.14 52.67 49.25
07/07/97 11/06/97 Cairn Energy USA Inc 22.30 28.97 26.67 (5.84) 13.19
07/07/97 10/21/97 RoTech Medical Corp 19.79 12.70 22.22 25.61 15.95
07/08/97 10/24/97 Equitable of Iowa Cos 18.52 20.35 21.70 86.30 38.78
07/09/97 09/23/97 Control Data Systems Inc 29.08 30.65 35.00 28.57 31.71
07/09/97 12/23/97 Seaman Furniture Co 21.46 25.25 21.46 43.14 27.64
07/10/97 11/18/97 Kinetic Concepts Inc 6.94 7.69 9.22 24.19 32.76
07/10/97 12/31/97 Reading & Bates Corp 16.55 14.52 30.47 53.19 69.09
07/15/97 10/02/97 DH Technology Inc 57.48 56.25 57.48 6.38 45.99
07/15/97 10/28/97 Intl Imaging Materials 67.35 60.18 64.89 32.69 69.88
07/15/97 09/04/97 Ply-Gem Industries Inc 20.00 16.42 19.08 30.00 48.57
07/17/97 10/22/97 Louisiana Land & Exploration 20.76 25.47 39.98 17.72 48.08
07/17/97 09/29/97 Octel Communications Corp 15.89 37.40 41.31 54.04 87.88
07/23/97 12/18/97 Alliance Imaging Inc 7.32 3.53 14.29 134.67 44.26
07/24/97 09/15/97 Nellcor Puritan-Bennett 36.12 43.40 57.24 26.67 67.65
07/28/97 02/02/98 Chips and Technologies Inc 25.00 32.08 68.68 77.22 115.38
07/28/97 11/17/97 Cyrix Corp 30.31 29.54 29.54 97.79 34.66
07/28/97 12/22/97 Freeport-McMoRan Inc 14.35 13.55 5.20 (16.77) 5.21
07/28/97 10/08/97 Regency Health Services Inc 34.35 50.43 43.09 104.65 107.06
07/30/97 09/18/97 Amdahl Corp 4.97 22.47 25.57 (49.13)
07/30/97 02/02/98 Plasti-Line Inc 36.47 36.47 30.34 84.13 65.71
07/31/97 09/24/97 Bucyrus International Inc 33.33 46.94 71.43 108.70 94.59
07/31/97 10/03/97 Delaware Otsego Corp 0 15.03 17.33 160.28 32.33
07/31/97 10/23/97 Sterling House Corp 30.36 29.47 40.46 48.69 88.44
08/04/97 10/24/97 Columbus Realty Trust 4.23 4.23 4.51 247.75 191.08
08/04/97 12/23/97 Perkins Family Restaurant LP 28.74 26.55 31.77 17.89 5.66
08/04/97 11/12/97 Sullivan Dental Products Inc 28.85 40.71 66.20 186.70 79.19
08/08/97 12/22/97 Titan Holdings Inc 15.99 19.06 24.85 57.29 30.26
08/11/97 12/19/97 Amscan Holdings Inc 36.08 37.50 46.67 23.36
08/11/97 09/30/97 National Sanitary Supply Co (6.67) 20.00 47.37
08/11/97 12/22/97 Vacation Break USA Inc 41.57 39.09 95.75 80.18 147.75
08/12/97 09/17/97 Isomedix Inc 5.81 15.49 13.89 47.75 38.98
08/12/97 03/03/98 LIN Television Corp 15.85 18.75 18.01
</TABLE>
Page F-10
<PAGE>
Merger Premiums to Market Value Analysis
Mergers with Target Price Equal to or Greater than $10 per Share
Announced and Completed 1/1/96-10/9/98
(continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Date Date
Announced Effective Target Name Target Business Description Acquiror Name
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
08/14/97 12/13/97 Allied Capital Commercial Corp Real estate investment trusts Allied Capital Lending Corp
08/14/97 12/31/97 Allied Capital Corp Pvd bus, personal fin svcs Allied Capital Lending Corp
08/14/97 09/16/97 American Medserve Corp Wholesale pharmaceuticals Omnicare Inc
08/14/97 09/24/97 Talbert Medical Management Own, op medical, dental clinics MedPartners Inc
08/14/97 12/29/97 Tuesday Morning Corp Own, operate giftware stores Madison Dearborn Partners
08/14/97 12/05/97 Uniforce Services Inc Pvd temporary personnel svcs Comforce Corp
08/18/97 11/04/97 Monterey Resources Inc Oil and gas exploration, prodn Texaco Inc
08/21/97 01/14/98 Boston Technology Inc Mnfr voice processing systems Comverse Technology Inc
08/25/97 10/21/97 ACC Consumer Finance Corp Pvd auto financing services Household International Inc
08/25/97 12/17/97 Mosince Paper Corp Manufacture paper Wausau Paper Mills
08/26/97 12/22/97 Savannah Foods & Industries Produce sugar, sugar by-prod Imperial Holly Corp
08/28/97 12/23/97 Evans Withycombe Residential Real estate investment trust Equity Residential Pptys Trust
08/28/97 02/25/98 Value Property Trust Real estate investment trust Wellsford Real Properties Inc
08/28/97 10/10/97 Versa Technologies Inc Mnfr rubber components, molds Applied Power Inc
08/29/97 12/29/97 Rexel Inc Whl electrical components Rexel SA (Pinault-Printemps)
09/03/97 12/30/97 Zytec Corp Mnfr electric power supplies Computer Products Inc
09/04/97 01/09/98 Hudson Foods Inc Produce poultry products Tyson Foods Inc
09/05/97 11/26/97 Medic Computer Systems Inc Pvd mgmt info sys design svcs Misys PLC
09/05/97 01/16/98 Technology Modeling Assoc Inc Dvlp simulation software Avant! Corp
09/08/97 02/02/98 CompuServe Inc (H&R Block) Internet service provider WorldCom Inc
09/08/97 12/31/97 Fuqua Enterprises Inc Manufacture tanned leather Graham-Field Health Products
09/10/97 11/28/97 Data Documents Inc Manufacture tabulating cards Corporate Express Inc
09/10/97 12/02/97 Tinsley Laboratories Inc Mnfr optical instr, lenses Silicon Valley Group Inc
09/11/97 12/22/97 Fieldcrest Cannon Inc Mnfr broadwoven fabrics Pillowtex Corp
09/12/97 12/09/97 Unison Software Inc Develop network mgmt software Tivoli Systems Inc (IBM Corp)
09/12/97 01/16/98 WHG Resort & Casino Inc Own, op resorts and casino Patriot Amer Hosp/Wyndham Intl
09/12/97 02/25/98 Western National Corp Insurance holding co American General Corp
09/15/97 12/19/97 Beacon Properties Corp Real estate investment trust Equity Office Properties Trust
09/16/97 11/04/97 All American Communications Pvd motion picture & video svc Pearson PLC
09/16/97 02/02/98 Quick & Reilly Group Inc Securities brokerage firm Fleet Financial Group Inc, MA
09/18/97 12/16/97 Guaranty National Corp Insurance company Orion Capital Corp
09/18/97 12/22/97 USLD Communications Corp Pvd long distance commun svcs LCI International Inc
09/19/97 01/16/98 Sterling Electronics Corp Whl electronic components Marshall Industries
09/21/97 12/16/97 Computer Data Systems Inc Design computer program data Affiliated Computer Services
09/22/97 12/05/97 Washington National Corp Insurance company Conseco Inc
09/23/97 01/12/98 Tejas Gas Corp Own, op natural gas lines Shell Oil (Royal Dutch Petro)
09/24/97 11/24/97 Allergan Ligand Retinoid Manufacture pharmaceuticals Ligand Pharmaceuticals Inc
09/24/97 12/12/97 Game Financial Corp Pvd fund access svcs Travelers Express Co (Viad)
09/24/97 11/28/97 Salomon Inc Investment bank, finl advisory Travelers Group Inc
09/25/97 02/19/98 Talley Industries Inc Mnfr guided missiles, space veh Carpenter Technology Corp
09/29/97 12/22/97 Graphic Industries Inc Pvd financial printing svcs Wallace Computer Services Inc
09/29/97 12/23/97 HPR Inc Pvd computer programming svcs HBO & Co
09/29/97 12/01/97 Morningstar Group Inc Produce dairy products Suiza Foods Corp
09/30/97 11/26/97 Arbor Health Care Co Own and operate nursing homes AHC Acquisition Corp
10/01/97 01/29/98 Brooks Fiber Properties Inc Pvd communication installation WorldCom Inc
10/01/97 09/14/98 MCI Communications Corp Pvd telecommunication services WorldCom Inc
10/02/97 04/30/98 Kapson Senior Quarters Corp Provide residential care svcs Prometheus Senior Quarters
10/03/97 12/29/97 Natl Health Enhancement Sys Develop healthcare software HBO & Co
10/06/97 01/28/98 Caliber Systems Inc Trucking holding company FDX Corp
10/06/97 12/19/97 EndoVascular Technologies Inc Mnfr surgical instruments Guidant Corp
10/06/97 03/20/98 Orion Network Systems Inc Pvd Communications svcs Loral Space & Communications
10/08/97 04/07/98 Associates First Capital Corp Pvd finance, leasing services Shareholders
10/09/97 12/23/97 Melamine Chemicals Inc Manufacture melamine crystal Borden Chemical Inc (Borden)
10/10/97 11/19/97 Greenfield Industries Inc Mnfr steel cutting tools Kennametal Inc
10/13/97 01/22/98 Netcom On-Line Communication Internet service provider ICG Communications Inc
10/13/97 12/01/97 Network General Corp Pvd computer sys design svcs McAfee Associates Inc
10/15/97 12/04/97 Viewlogic Systems Inc Dvlp automation software Synopsys Inc
10/16/97 02/12/98 Omni Insurance Group Inc Insurance company Hartford Financial Services
10/17/97 12/29/97 Computational Systems Inc Manufacture measuring devices Emerson Electric Co
10/17/97 11/19/97 Exide Electronics Group Inc Manufacture power supplies BTR PLC
10/17/97 01/02/98 Infinity Financial Technology Dvlp financial software SunGard Data Systems Inc
10/20/97 02/24/98 ITT Corp Own and operate hotels Starwood Hotels & Resorts
10/20/97 03/06/98 Santa Fe Pacific Pipeline Operate petroleum pipelines Kinder Morgan Energy Partners
10/20/97 06/24/98 Ticketmaster Group Inc Own, operate ticket agencies HSN Inc
10/21/97 01/07/98 International Dairy Queen Inc Whl dairy desserts, hamburgers Berkshire Hathaway Inc
10/23/97 12/19/97 Premenos Technology Corp Develop EDT software Harbinger Corp
</TABLE>
<TABLE>
<CAPTION>
Value of Enterprise
Date Date Acquiror Transaction Value
Announced Effective Target Name Business Description ($ mil) ($ mil)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
08/14/97 12/13/97 Allied Capital Commercial Corp Closed-end mgmt investment co 381.30 621.24
08/14/97 12/31/97 Allied Capital Corp CLosed-end mgmt investment co 130.00 210.64
08/14/97 09/16/97 American Medserve Corp Whl, retail pharmaceuticals 233.20 240.47
08/14/97 09/24/97 Talbert Medical Management Pvd medical services to HMO's 189.00
08/14/97 12/29/97 Tuesday Morning Corp Investors 298.60 337.36
08/14/97 12/05/97 Uniforce Services Inc Pvd help supply services 140.70 133.72
08/18/97 11/04/97 Monterey Resources Inc Oil and gas exploration, prodn 1,435.30 1,320.89
08/21/97 01/14/98 Boston Technology Inc Mnfr telecommunication equip 873.90 906.34
08/25/97 10/21/97 ACC Consumer Finance Corp Provide financial services 186.90 219.83
08/25/97 12/17/97 Mosince Paper Corp Manufacture, wholesale paper 446.30 512.46
08/26/97 12/22/97 Savannah Foods & Industries Produce sugar 582.90 609.91
08/28/97 12/23/97 Evans Withycombe Residential Real estate investment trust 932.40 1,068.03
08/28/97 02/25/98 Value Property Trust Real estate investment trust 186.60 163.55
08/28/97 10/10/97 Versa Technologies Inc Mnfr tools, equip, consumables 141.90 140.65
08/29/97 12/29/97 Rexel Inc Whl radios, televisions 302.00 647.89
09/03/97 12/30/97 Zytec Corp Design, mnfr electronic prod 412.30 428.02
09/04/97 01/09/98 Hudson foods Inc Poultry, meat processing 648.40 1,021.87
09/05/97 11/26/97 Medic Computer Systems Inc Manufacture computers 915.80 882.60
09/05/97 01/16/98 Technology Modeling Assoc Inc Develop software 144.30 140.54
09/08/97 02/02/98 CompuServe Inc (H&R Block) Pvd telecommunication svcs 1,185.90 1,052.17
09/08/97 12/31/97 Fuqua Enterprises Inc Mnfr medical supply, healthcare 231.00 229.95
09/10/97 11/28/97 Data Documents Inc Retail office supplies 159.40 212.19
09/10/97 12/02/97 Tinsley Laboratories Inc Mnfr semiconductor equipment 40.50 40.89
09/11/97 12/22/97 Fieldcrest Cannon Inc Mnfr, whl home textile products 768.20 787.17
09/12/97 12/09/97 Unison software Inc Dvlp systems mgmt software 183.00 180.26
09/12/97 01/16/98 WHG Resort & Casino Inc Real estate investment trust 266.00 169.94
09/12/97 02/25/98 Western National Corp Insurance holding company 1,215.00 2,340.92
09/15/97 12/19/97 Beacon Properties Corp Real estate investment trust 4,039.40 3,358.85
09/16/97 11/04/97 All American Communications Publish newspapers, periodicals 500.20 498.59
09/16/97 02/02/98 Quick & Reilly Group Inc Bank holding company 1,525.50 1,440.08
09/18/97 12/16/97 Guaranty National Corp Insurance company; holding co 117.20 647.41
09/18/97 12/22/97 USLD Communications Corp Pvd telecommunications svcs 402.80 407.07
09/19/97 01/16/98 Sterling Electronics Corp Whl electronic components 217.60 208.73
09/21/97 12/16/97 Computer Data Systems Inc Pvd date processing services 383.70 389.58
09/22/97 12/05/97 Washington National Corp Insurance holding company 424.00 433.68
09/23/97 01/12/98 Tejas Gas Corp Oil and gas exploration, prodn 2,165.60 2,203.96
09/24/97 11/24/97 Allergan Ligand Retinoid Manufacture diagnostic tests 71.40 39.70
09/24/97 12/12/97 Game Financial Corp Pvd money order issuance svcs 50.60 42.63
09/24/97 11/28/97 Salomon Inc Insurance firm 8,852.10 141,077.45
09/25/97 02/19/98 Talley Industries Inc Mnfr zirconium, steel products 309.40 264.39
09/29/97 12/22/97 Graphic Industries Inc Mnfr manifold business forms 424.50 418.75
09/29/97 12/23/97 HPR Inc Dvlp healthcare software 389.60 376.01
09/29/97 12/01/97 Morningstar Group Inc Produce milk, related prod 972.00 932.58
09/30/97 11/26/97 Arbor Health Care Co Investment holding company 424.20 419.33
10/01/97 01/29/98 Brooks Fiber Properties Inc Pvd telecommunication svcs 2,532.60 3,112.89
10/01/97 09/14/98 MCI Communications Corp Pvd telecommunication svcs 41,906.90 43,588.51
10/02/97 04/30/98 Kapson Senior Quarters Corp Pvd nursing care services 247.40 231.85
10/03/97 12/29/97 Natl Health Enhancement Sys Devlp healthcare software 97.80 96.52
10/06/97 01/28/98 Caliber Systems Inc Provide express delivery svcs 2,471.40 2,681.17
10/06/97 12/19/97 EndoVascular Technologies Inc Mnfr cardiovascular equipment 187.80 190.46
10/06/97 03/20/98 Orion Network Systems Inc Manufacture satellite equip 425.60 1,265.08
10/08/97 04/07/98 Associates First Capital Corp Investor Group 26,624.60 75,189.21
10/09/97 12/23/97 Melamine Chemicals Inc Mnfr formaldehyde, resins 119.70 87.78
10/10/97 11/19/97 Greenfield Industries Inc Mnfr metalworking tools 957.00 1,062.17
10/13/97 01/22/98 Netcom On-Line Communication Pvt telecommunications svcs 269.40 214.02
10/13/97 12/01/97 Network General Corp Develop network software 1,142.50 1,113.34
10/15/97 12/04/97 Viewlogic Systems Inc Develop automation software 530.90 492.99
10/16/97 02/12/98 Omni Insurance Group Inc Provide insurance services 184.70 184.72
10/17/97 12/29/97 Computational Systems Inc Mnfr appliance componments 158.60 160.45
10/17/97 11/19/97 Exide Electronics Group Inc Mnfr plastic, rubber,indl prods 583.20 590.91
10/17/97 01/02/98 Infinity Financial Technology Provide data processing svcs 358.00 347.76
10/20/97 02/24/98 ITT Corp Real estate investment trust 13,748.20 13,534.84
10/20/97 03/06/98 Santa Fe Pacific Pipeline Operate natural gas pipelines 1,473.00 1,352.15
10/20/97 06/24/98 Ticketmaster Group Inc Operate television stations 413.20 845.30
10/21/97 01/07/98 International Dairy Queen Inc Property, casualty insurance co 596.90 558.69
10/23/97 12/19/97 Premenos Technology Corp Dvle elctn commerce software 234.70 211.13
</TABLE>
<TABLE>
<CAPTION>
1 Day 1 Week 4 Weeks 3 Months 1 Year
Date Date Prior to Prior to Prior to Prior to Prior to
Announced Effective Target Business Description Annc. Date Annc. Date Annc. Date Annc. Date Annc. Date
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
08/14/97 12/13/97 Allied Capital Commercial Corp 7.49 7.77 10.64 18.18 8.90
08/14/97 12/31/97 Allied Capital Corp 7.83 7.83 9.10 19.93 23.12
08/14/97 09/16/97 American Medserve Corp 2.49 16.13 25.76
08/14/97 09/24/97 Talbert Medical Management 10.53 18.87 36.96 72.60
08/14/97 12/29/97 Tuesday Morning Corp 22.70 25.79 11.11 197.03 28.21
08/14/97 12/05/97 Uniforce Services Inc 37.56 37.56 52.62 48.23 101.50
08/18/97 11/04/97 Monterey Resources Inc 39.42 39.42 54.13 30.23
08/21/97 01/14/98 Boston Technology Inc (0.32) 16.22 10.37 103.42 15.71
08/25/97 10/21/97 ACC Consumer Finance Corp 35.82 34.75 29.64 125.16 96.69
08/25/97 12/17/97 Mosince Paper Corp 15.62 15.91 5.64 52.89 11.73
08/26/97 12/22/97 Savannah Foods & Industries 8.36 14.89 17.39 65.31 31.71
08/28/97 12/23/97 Evans Withycombe Residential 14.16 21.39 18.88 21.40 22.88
08/28/97 02/25/98 Value Property Trust 24.99 20.90 18.68 32.00 25.59
08/28/97 10/10/97 Versa Technologies Inc 36.81 33.11 31.33 72.84 72.84
08/29/97 12/29/97 Rexel Inc 19.21 26.32 21.62 62.16 23.29
09/03/97 12/30/97 Zytec Corp 45.35 48.22 71.17 283.18
09/04/97 01/09/98 Hudson Foods Inc 23.49 31.63 28.64 51.64 25.81
09/05/97 11/26/97 Medic Computer Systems Inc 7.69 12.00 25.00 17.15 89.19
09/05/97 01/16/98 Technology Modeling Assoc Inc 29.52 52.81 43.16 36.00
09/08/97 02/02/98 CompuServe Inc (H&R Block) 1.39 2.92 8.36 1.39 16.36
09/08/97 12/31/97 Fuqua enterprises Inc 42.32 52.82 78.75 57.24 81.87
09/10/97 11/28/97 Data Documents Inc 10.91 14.87 26.13 53.14 26.12
09/10/97 12/02/97 Tinsley Laboratories Inc 96.36 96.36 96.36 301.64 132.53
09/11/97 12/22/97 Fieldcrest Cannon Inc 1.49 8.58 31.72 86.30 76.62
09/12/97 12/09/97 Unison Software Inc 9.09 25.00 22.45 4.65 100.00
09/12/97 01/16/98 WHG Resort & Casino Inc 35.08 72.35 78.50 117.30
09/12/97 02/25/98 Western National Corp 9.58 7.43 14.41 68.88 13.62
09/15/97 12/19/97 Beacon Properties Corp 28.39 30.62 30.85 69.44 45.80
09/16/97 11/04/97 All American 12.71 41.67 37.84 175.68 100.00
09/16/97 02/02/98 Quick & Reilly Group Inc 18.23 33.10 69.63 103.58 60.91
09/18/97 12/16/97 Guaranty National Corp 10.77 23.87 27.72 125.00 44.00
09/18/97 12/22/97 USLD Communications Corp 18.86 34.13 120.92 40.10
09/19/97 01/16/98 Sterling Electronics Corp 16.26 30.23 57.01 91.74 69.70
09/21/97 12/16/97 Computer Data Systems Inc 42.54 47.63 73.68 129.64 84.54
09/22/97 12/05/97 Washington National Corp 2.70 4.11 12.24 10.37 17.70
09/23/97 01/12/98 Tejas Gas Corp 24.09 22.39 33.70 75.71 50.23
09/24/97 11/24/97 Allergan Ligand Retinoid 13.03 11.59 7.83
09/24/97 12/12/97 Game Financial Corp 4.88 4.88 4.88 10.26 11.69
09/24/97 11/28/97 Salomon Inc 21.43 24.09 34.60 77.50 44.76
09/25/97 02/19/98 Talley Industries Inc 6.67 10.98 34.27 54.84 34.27
09/29/97 12/22/97 Graphic Industries Inc 8.75 19.18 34.88 155.88 65.71
09/29/97 12/23/97 HPR Inc 22.92 24.54 32.38 57.08 30.54
09/29/97 12/01/97 Morningstar Group Inc 14.62 11.48 53.46
09/30/97 11/26/97 Arbor Health Care Co 15.39 19.60 26.76 92.51 39.53
10/01/97 01/29/98 Brooks Fiber Properties Inc 35.71 58.40 83.65 121.34 93.47
10/01/97 09/14/98 MCI Communications Corp 65.17 63.55 58.10 96.15 20.35
10/02/97 04/30/98 Kapson Senior Quarters Corp (0.86) 9.43 1.75 45.00 34.88
10/03/97 12/29/97 Natl Health Enhancement Sys 16.69 41.48 121.93 76.88 85.57
10/06/97 01/28/98 Caliber Systems Inc 13.90 19.72 42.57 284.73 68.28
10/06/97 12/19/97 EndoVascular Technologies Inc 22.14 22.14 73.91 56.86 87.13
10/06/97 03/20/98 Orion Network Systems Inc 20.16 27.94 32.62 91.91 68.16
10/08/97 04/07/98 Associates First Capital Corp 32.67 36.32 31.24 96.48 39.00
10/09/97 12/23/97 Melamine Chemicals Inc 70.83 72.63 70.83 177.97 46.43
10/10/97 11/19/97 Greenfield Industries Inc 19.69 26.67 44.08 35.71 34.22
10/13/97 01/22/98 Netcom On-Line Communication 49.75 70.94 78.52 51.00 64.73
10/13/97 12/01/97 Network General Corp 19.65 25.27 42.72
10/15/97 12/04/97 Viewlogic Systems Inc 24.44 25.14 29.48 215.49 82.11
10/16/97 02/12/98 Omni Insurance Group Inc 78.87 75.78 130.91 252.78 154.00
10/17/97 12/29/97 Computational Systems Inc 45.08 48.25 62.47 91.29 101.02
10/17/97 11/19/97 Exide Electronics Group Inc 125.24 133.17 149.46 146.81 30.34
10/17/97 01/02/98 Infinity Financial Technology 19.00 17.93 17.40 (0.09)
10/20/97 02/24/98 ITT Corp 94.29 98.25 95.40 98.83 34.12
10/20/97 03/06/98 Santa Fe Pacific Pipeline 31.82 33.24 38.56 51.64 34.27
10/20/97 06/24/98 Ticketmaster Group Inc 32.00 28.43 56.32 68.51
10/21/97 01/07/98 International Dairy Queen Inc 11.92 9.09 9.37 35.00 8.54
10/23/97 12/19/97 Premenos Technology Corp 55.20 49.12 27.82 8.63 117.26
</TABLE>
<PAGE>
Merger Premiums to Market Value Analysis
Mergers with Target Price Equal to or Greater than $10 per Share
Announced and Completed 1/1/96-10/9/98
(continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date Date
Announced Effective Target Name Target Business Description Acquiror Name
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
10/23/97 04/02/98 Universal Outdoor Holdings Inc Pvd outdoor advertising svcs Clear Channel Communications
10/29/97 01/30/98 Carson Pirie Scott & Co Own, op department stores Proffitt's Inc
10/31/97 03/12/98 ILC Technology Inc Mnfr high intensity lamps BEC Group Inc
10/31/97 02.27/98 Xpedite Systems Inc Pvd enhanced fax services Premiere Technologies Inc
11/03/97 03/24/98 Oregon Metallurgical Corp Mnfr, whl titanium Allegheny Teledyne Inc
11/03/97 01/09/98 Sequana Therapeutics Mnfr diagnostic substances Arris Pharmaceuticals Corp
11/04/97 05/20/98 Safety-Kleen Corp (Laidlaw) Pvd vehicular cleaning svcs Laidlaw Environmental Services
11/05/97 01/16/98 Mac Frugal's Bargains Whl, ret general merchandise Consolidated Stores Corp
11/07/97 03/10/98 Quality Food Centers Inc Own and operate supermarkets Fred Meyer Inc
11/11/97 02/11/98 Healthdyne Technologies Inc Mnfr specialized med devices Respironics Inc
11/13/97 03/25/98 Chartwell Leisure Inc Own, op hotels and motels Investor Group
11/13/97 03/11/98 Hugoton Energy Corp Oil and gas exploration prodn Chesapeake Energy Corp
11/17/97 02/26/98 Grantic Financial Inc Pvd business credit services Fidelity National Financial
11/18/97 01/08/98 Jackson Hewitt Pvd tax preparation services Cendant Corp
11/19/97 02/27/98 Amati Communications Corp Mnfr data communications equip Texas Instruments Inc
11/19/97 04/01/98 Renal Treatment Centers Inc Own, op kidney dialysis centers Total Renal Care Holdings Inc
11/19/97 08/12/98 Telemundo Group Inc Own. op Spanish TV stations Investor Group
11/21/97 01/28/98 BDM International Inc Pvd comp info technology svcs TRW Inc
11/24/97 03/30/98 MAPCO Inc Gas utility, petro refining Williams Cos Inc
11/26/97 04/23/98 ACC Corp Pvd telecommunications svcs Teleport Communications Group
11/26/97 02/25/98 Universal Hospital Services Pvd med equip rental services Investor Group
11/28/97 12/30/97 Deflecta-Shield Corp Mnfr truck accessories Lund International Holdings
12/01/97 02/19/98 Raptor Systems Inc Develop security mgmt software AXENT Technologies Inc
12/02/97 06/02/98 Interstate Hotels Co Own, op hotels and motels Patriot Amer Hosp/Wyndam Ind
12/11/97 01/20/98 TriMas Corp Mnfr specialty closures, caps MascoTech Inc
12/12/97 05/29/98 Lukens Inc Mnfr steel plates Bethlehem Steel Corp
12/15/97 03/27/98 Gulf South Medical Supply Inc Wholesale medical supplies Physician Sales & Services Inc
12/15/97 05/01/98 Piper Jaffray Cos Investment bank; holding co U.S. Bancorp, Minneapolis, MN
12/15/97 03/02/98 Sano Corp Mnfr pharmaceuticals Elan Corp PLC
12/16/97 05/08/98 Ambassador Apartments Inc Real estate investment trust Apartment Investment & Mgmt Co
12/16/97 01/30/98 Spine-Tech Inc Mnfr spinal implants Sulzer Medical (Gebrueder Sulzer)
12/17/97 04/08/98 Oasis Residential Inc Real estate investment trust Camden Property Trust
12/17/97 01/23/98 Suburban Ostomy Supply Co Inc Whl medical and hospital equip InvaCare Corporation
12/19/97 03/30/98 ASR Investments Corp Real estate investment trust United Dominion REalty Tr Inc
12/19/97 06/17/98 Chemi-Trol Chemical Co Mnfr steel pressure tanks Harsco Corp
12/19/97 04/20/98 Continental Homes Holding Construct, design homes DR Horton Inc
12/19/97 05/01/98 IPC Information Systems Inc Mnfr telecommunications equip Cable Systems International
12/19/97 06/04/98 Panavision Inc Mnfr camera systems Mafco Holdings Inc
12/19/97 01/20/98 Showboat Inc Own, operate hotel casinos Harrah's Entertainment
12/19/97 01/27/98 Software Artistry Inc Develop help-desk software Tivoli Systems Inc (IBM Corp)
12/19/97 02/03/98 Synmetrics Industries Inc Mnfr communications equip Tel-Save Holdings
12/22/97 05/21/98 Dynatech Corp Mnfr test, analysis products Investor Group
12/22/97 09/30/98 Essex County Gas Gas utility Eastern Enterprises
12/23/97 04/01/98 Union Corp Pvd adjustment collection svcs Outsourcing Solutions Inc
01/01/98 07/31/98 GoodMark Foods Inc Produce meat snacks ConAgra Inc
01/05/98 07/17/98 La Quinta Inns Inc Own, op motor inns Medtrust Acquisition Co
01/06/98 04/01/98 Schult Homes Corp Manufacture mobile homes Oakwood Homes Corp
01/08/98 07/23/98 Teleport Communications Group Pvd telecommunication services AT&T Corp
01/12/98 02/19/98 Computer Language Research Inc Dvlp tax processing software Research Institute of America
01/14/98 06/01/98 Continental Can Co Inc Mnfr metal, plastic cans Suiza Foods Corp
01/14/98 06/19/98 Price REIT Inc Real estate investment trust Kimco Realty Corp
01/19/98 04/24/98 USF&G Corp Insurance holding company St Paul Cos Inc
01/20/98 10/05/98 Buttrey Food and Drug Stores Own, op supermarkets, drug store Albertson's Inc
01/20/98 04/16/98 NACT Telecommunications (GST) Pvd telephone commun svcs World Access Inc
01/20/98 05/27/98 Regal Cinemas Inc Pvd movie exhibition services Investor Group
01/21/98 05/22/98 Thermadyne Holdings Corp Mnfr welding equip, indl mach DLJ Merchant Bkg Partners II
01/23/98 04/13/98 Handy & Harman Mnfr, whl metal wire, cable WHX Corp
01/26/98 06/11/98 Digital Equipment Corp Mnfr computers, equip Compaq Computer Corp
01/27/98 03/03/98 State of the Art Inc Develop financial software Sage Group PLC
02/02/98 03/27/98 BGS Systems Inc Develop utilities software BMC Software Inc
02/02/98 04/20/98 Source Services Corp Provide help supply services Romac International Inc
02/04/98 03/20/98 Industrial Acoustics Inc Mnfr noise reducing products IAC Holdings Corp
02/09/98 03/31/98 Arbor Drugs Inc Own, operate drug stores CVS Corp
02/09/98 06/15/98 Culligan Water Technologies Mnfr, whl purification products United States Filter Corp
02/09/98 04/16/98 Summit Care Corp Provide nursing services Fountain View (Heritage)
02/10/98 06/04/98 Illinois Central Corp Railroad transportation svcs Canadian National Railway Co
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Value of Enter-
Trans- prise
Date Date Acquiror action Value
Announced Effective Target Name Business Description ($ mil) ($ mil)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
10/23/97 04/02/98 Universal Outdoor Holdings Inc Own, op TV, radio bdscstg station 1,627.80 1,729.53
10/29/97 01/30/98 Carson Pirie Scott & Co Own and operate dept stores 867.70 992.38
10/31/97 03/12/98 ILC Technology Inc Mnfr, whl eyeglass lenses, frame 130.80 135.55
10/31/97 02.27/98 Xpedite Systems Inc Pvd computer telephony svcs 496.40 468.79
11/03/97 03/24/98 Oregon Metallurgical Corp Mnfr specialty materials, metal 557.20 566.80
11/03/97 01/09/98 Sequana Therapeutics Manufacture synthetic drugs 169.40 169.97
11/04/97 05/20/98 Safety-Kleen Corp (Laidlaw) Pvd waste removal svcs 1,804.00 2,054.95
11/05/97 01/16/98 Mac Frugal's Bargains General merchandise ret stores 994.10 1,040.90
11/07/97 03/10/98 Quality Food Centers Inc Own, operate department stores 1,703.40 1,671.77
11/11/97 02/11/98 Healthdyne Technologies Inc Mnfr, whl respiratory prod 341.90 344.16
11/13/97 03/25/98 Chartwell Leisure Inc Investor group 240.80 272.75
11/13/97 03/11/98 Hugoton Energy Corp Oil and gas exploration, prodn 377.00 377.46
11/17/97 02/26/98 Grantic Financial Inc Title insurance company 132.40 151.93
11/18/97 01/08/98 Jackson Hewitt Provide discount club svcs 468.20 442.64
11/19/97 02/27/98 Amati Communications Corp Mnfr semiconductors, computers 459.80 463.30
11/19/97 04/01/98 Renal Treatment Centers Inc Pvd kidney dialysis services 1,362.60 1,457.03
11/19/97 08/12/98 Telemundo Group Inc Investor group 521.40 710.48
11/21/97 01/28/98 BDM International Inc Elec equip, credit reporting 888.00 923.01
11/24/97 03/30/98 MAPCO Inc Gas utility 2,634.10 3,405.65
11/26/97 04/23/98 ACC Corp Pvd telecommunication services 906.80 930.23
11/26/97 02/25/98 Universal Hospital Services Investor group 133.00 122.73
11/28/97 12/30/97 Deflecta-Shield Corp Mnfr automobile parts 89.80 87.26
12/01/97 02/19/98 Raptor Systems Inc Develop software 253.70 225.83
12/02/97 06/02/98 Interstate Hotels Co Real estate investment trust 2,055.90 2,095.27
12/11/97 01/20/98 TriMas Corp Mnfr motor vehicle components 911.70 1,384.00
12/12/97 05/29/98 Lukens Inc Manufacture steel products 700.20 751.93
12/15/97 03/27/98 Gulf South Medical Supply Inc Wholesale medical equipment 678.90 629.50
12/15/97 05/01/98 Piper Jaffray Cos Bank holding company 767.80 991.44
12/15/97 03/02/98 Sano Corp Mnfr drug delivery systems 396.80 395.98
12/16/97 05/08/98 Ambassador Apartments Inc real estate investment trust 663.00 620.98
12/16/97 01/30/98 Spine-Tech Inc Mnfr medical implants 621.10 618.51
12/17/97 04/08/98 Oasis Residential Inc Real estate investment trust 395.20 825.51
12/17/97 01/23/98 Suburban Ostomy Supply Co Inc Mnfr surgical, medical supplies 130.80 128.54
12/19/97 03/30/98 ASR Investments Corp real estate investment trust 277.00 264.20
12/19/97 06/17/98 Chemi-Trol Chemical Co Mnfr scaffolding, pipes 46.10 55.83
12/19/97 04/20/98 Continental Homes Holding Construct residential bldgs 590.20 569.49
12/19/97 05/01/98 IPC Information Systems Inc Mnfr telecommun equip 201.70 252.03
12/19/97 06/04/98 Panavision Inc Mnfr toilet preparation 296.60 np
12/19/97 01/20/98 Showboat Inc Own, op hotel casinos 1,147.60 987.48
12/19/97 01/27/98 Software Artistry Inc Dvlp systems mgmt software 201.90 190.51
12/19/97 02/03/98 Synmetrics Industries Inc ,Pvd telecommunications svcs 25.00 31.51
12/22/97 05/21/98 Dynatech Corp Investor group 762.90 783.40
12/22/97 09/30/98 Essex County Gas Gas utility holding company 79.20 117.58
12/23/97 04/01/98 Union Corp Pvd outsourcing svcs 193.00 202.64
01/01/98 07/31/98 GoodMark Foods Inc Produce meats, eggs, cooking oil 217.80 230.60
01/05/98 07/17/98 La Quinta Inns Inc Real estate investment trust 2,907.50 3,040.50
01/06/98 04/01/98 Schult Homes Corp Mnfr, ret factory-built homes 101.40 104.04
01/08/98 07/23/98 Teleport Communications Group Own, op telecommunications sys 11,187.70 4,612.51
01/12/98 02/19/98 Computer Language Research Inc Publish tax law information 325.40 320.43
01/14/98 06/01/98 Continental Can Co Inc Produce milk, related prod 330.50 334.44
01/14/98 06/19/98 Price REIT Inc Real estate investment trust 870.60 804.79
01/19/98 04/24/98 USF&G Corp Insurance holding company 3,782.20 3,382.59
01/20/98 10/05/98 Buttrey Food and Drug Stores Supermarkets, department stores 139.20 175.71
01/20/98 04/16/98 NACT Telecommunications (GST) Pvd telecommunication services 53.10 144.63
01/20/98 05/27/98 Regal Cinemas Inc Investor group 1,462.70 1,408.72
01/21/98 05/22/98 Thermadyne Holdings Corp Merchant banking firm 790.00 742.65
01/23/98 04/13/98 Handy & Harman Mnfr steel and steel prods 625.10 613.20
01/26/98 06/11/98 Digital Equipment Corp Manufacture personal computers 9,123.70 8,620
01/27/98 03/03/98 State of the Art Inc Dvlp, whl accounting software 245.20 244.44
02/02/98 03/27/98 BGS Systems Inc Develop software 306.90 288.51
02/02/98 04/20/98 Source Services Corp Pvd specialty staffing svcs 454.40 431.09
02/04/98 03/20/98 Industrial Acoustics Inc Investment company 25.30 48.96
02/09/98 03/31/98 Arbor Drugs Inc Own and operate drug stores 1,423.30 957.18
02/09/98 06/15/98 Culligan Water Technologies Mnfr water treatment equip 1,474.30 1,927.57
02/09/98 04/16/98 Summit Care Corp Own, op healthcare facilities 275.10 276.92
02/10/98 06/04/98 Illinois Central Corp Pvd railroad services 2,931.00 2,996.58
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Premium
----------------------------------------------------------------------------------
Date Date 1 Day Prior 1 Week Prior 4 Weeks Prior 3 Months Prior 1 Year Prior
Announced Effective Target Name to Annc. Date to Annc. Date to Annc. Date to Annc. Date to Annc. Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10/23/97 04/02/98 Universal Outdoor Holdings Inc 2.32 5.17 20.46 20.65 21.75
10/29/97 01/30/98 Carson Pirie Scott & Co 38.83 39.30 31.80 109.29 56.87
10/31/97 03/12/98 ILC Technology Inc 108.72 107.62 108.72 125.56 128.19
10/31/97 02.27/98 Xpedite Systems Inc 69.02 73.02 68.05 78.29 73.02
11/03/97 03/24/98 Oregon Metallurgical Corp 45.50 61.66 40.62 9.12 35.05
11/03/97 01/09/98 Sequana Therapeutics 44.00 47.27 23.43 6.23 82.54
11/04/97 05/20/98 Safety-Kleen Corp (Laidlaw) 26.16 38.06 47.32
11/05/97 01/16/98 Mac Frugal's Bargains 2.92 18.49 23.46 62.78 33.31
11/07/97 03/10/98 Quality Food Centers Inc 13.86 23.43 27.96 46.76 42.28
11/11/97 02/11/98 Healthdyne Technologies Inc 44.36 40.15 44.36 166.67 44.36
11/13/97 03/25/98 Chartwell Leisure Inc 11.29 4.55 11.29 25.45 12.20
11/13/97 03/11/98 Hugoton Energy Corp 7.68 11.04 26.91 52.34 12.25
11/17/97 02/26/98 Grantic Financial Inc 89.79 89.79 87.61 155.00 87.59
11/18/97 01/08/98 Jackson Hewitt 26.51 21.70 47.83 1,600.00 156.60
11/19/97 02/27/98 Amati Communications Corp 31.69 44.14 13.48 13.58 26.48
11/19/97 04/01/98 Renal Treatment Centers Inc 8.63 17.04 26.87 64.55 16.63
11/19/97 08/12/98 Telemundo Group Inc 19.66 29.07 24.96 47.72 30.76
11/21/97 01/28/98 BDM International Inc 31.11 43.47 38.01 19.19 13.46
11/24/97 03/30/98 MAPCO Inc 21.05 35.99 43.66 36.24 53.83
11/26/97 04/23/98 ACC Corp 14.94 19.05 84.33 65.29 71.67
11/26/97 02/25/98 Universal Hospital Services 29.17 29.17 25.25 67.57 26.53
11/28/97 12/30/97 Deflecta-Shield Corp 33.33 33.33 77.78 82.86 70.67
12/01/97 02/19/98 Raptor Systems Inc 5.40 20.73 16.49 (24.55) 22.40
12/02/97 06/02/98 Interstate Hotels Co 2.56 8.70 27.39 45.63 30.15
12/11/97 01/20/98 TriMas Corp 12.65 9.96 18.97 42.27 13.58
12/12/97 05/29/98 Lukens Inc 92.00 94.33 69.61 64.38 48.61
12/15/97 03/27/98 Gulf South Medical Supply Inc 38.50 21.97 16.04 36.44 49.07
12/15/97 05/01/98 Piper Jaffray Cos 25.21 24.17 54.01 132.81 44.66
12/15/97 03/02/98 Sano Corp 52.71 42.64 95.13 105.08 71.32
12/16/97 05/08/98 Ambassador Apartments Inc 4.44 5.42 5.42 4.10 (13.30)
12/16/97 01/30/98 Spine-Tech Inc 14.29 52.94 55.81 121.28 16.20
12/17/97 04/08/98 Oasis Residential Inc 9.47 10.72 7.95 12.32 (2.60)
12/17/97 01/23/98 Suburban Ostomy Supply Co Inc 8.05 13.25 13.25 2.17 22.08
12/19/97 03/30/98 ASR Investments Corp 4.38 1.09 2.56 3.76 (5.16)
12/19/97 06/17/98 Chemi-Trol Chemical Co 61.40 61.40 64.29 113.95 75.24
12/19/97 04/20/98 Continental Homes Holding 26.28 27.64 35.97 114.69 61.02
12/19/97 05/01/98 IPC Information Systems Inc 14.29 31.25 14.29 182.35 100.00
12/19/97 06/04/98 Panavision Inc 3.42 19.10 24.71 21.14
12/19/97 01/20/98 Showboat Inc 66.78 62.91 67.35 50.46
12/19/97 01/27/98 Software Artistry Inc 61.98 57.43 237.93 67.52
12/19/97 02/03/98 Synmetrics Industries Inc 36.36 172.73 110.53 114.29
12/22/97 05/21/98 Dynatech Corp 29.93 37.16 29.93 (41.41) (42.38)
12/22/97 09/30/98 Essex County Gas 26.56 55.46 61.17 97.44 74.73
12/23/97 04/01/98 Union Corp 14.55 13.51 23.53 41.57 29.90
01/01/98 07/31/98 GoodMark Foods Inc 54.49 75.88 69.36 73.21 68.12
01/05/98 07/17/98 La Quinta Inns Inc 28.40 35.95 35.95 41.50 47.00
01/06/98 04/01/98 Schult Homes Corp 1.12 10.43 19.21 15.51 25.00
01/08/98 07/23/98 Teleport Communications Group (2.45) 1.72 16.96 76.12 20.38
01/12/98 02/19/98 Computer Language Research Inc 60.71 62.16 69.81 767.47 1,025.00
01/14/98 06/01/98 Continental Can Co Inc 45.83 74.37 71.16 198.35 72.98
01/14/98 06/19/98 Price REIT Inc 13.48 14.33 18.21 26.42 17.50
01/19/98 04/24/98 USF&G Corp 18.19 22.47 14.51 18.55 17.52
01/20/98 10/05/98 Buttrey Food and Drug Stores 44.19 44.19 47.62 89.31 39.33
01/20/98 04/16/98 NACT Telecommunications (GST) 12.00 12.45 16.67 20.69
01/20/98 05/27/98 Regal Cinemas Inc 14.29 10.71 34.78 29.17 19.23
01/21/98 05/22/98 Thermadyne Holdings Corp 19.48 21.05 18.46 30.19 15.72
01/23/98 04/13/98 Handy & Harman 8.67 14.63 1.62 118.60 30.56
01/26/98 06/11/98 Digital Equipment Corp 32.06 50.25 62.45 61.07 25.65
01/27/98 03/03/98 State of the Art Inc 33.33 35.39 35.39 57.14 38.58
02/02/98 03/27/98 BGS Systems Inc 23.29 32.35 42.86 57.89 37.93
02/02/98 04/20/98 Source Services Corp 51.12 56.69 50.24 140.98 59.65
02/04/98 03/20/98 Industrial Acoustics Inc 0 4.76 10.00 2.33 10.00
02/09/98 03/31/98 Arbor Drugs Inc 1.86 14.12 18.13 82.45 30.81
02/09/98 06/15/98 Culligan Water Technologies 57.49 62.89 27.35 56.96 43.47
02/09/98 04/16/98 Summit Care Corp 14.29 31.25 37.71 97.65 27.27
02/10/98 06/04/98 Illinois Central Corp 10.64 20.00 18.86 17.74 8.71
</TABLE>
F-12
<PAGE>
Merger Premiums to Market Value Analysis
Mergers with Target Price Equal to or Greater than $10 per Share
Announced and Completed 1/1/96-10/9/98
(continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date Date
Announced Effective Target Name Target Business Description Acquiror Name
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
02/11/98 06/10/98 MTL Inc Pvd tank truck carrier svcs Sombrero Acquisition Corp
02/11/98 05/20/98 Waverly Inc Publish books, periodicals Wotlers Kluwer NV
02/16/98 08/04/98 Coherent Communications Sys Mnfr voice enhancement prods Tellabs Inc
02/17/98 05/27/98 Devon Group Inc Pvd graphic arts services Applied Graphics Technologies
02/17/98 06/11/98 Zurn Industries Inc Mnfr environmental equipment US Industries Inc
02/18/98 06/27/98 Republic Automotive Parts Inc Mnfr, who automotive parts Keystone Automotive Inds Inc
02/19/98 04/21/98 Mastering Inc Provide computer training svcs PLATINUM Technology Inc
02/23/98 06/30/98 Money Store Inc. Provide mtg svcs, loans First Union Corp, Charlotte, NC
02/23/98 04/28/98 Trusted Information Systems Develop security software Network Associates Inc
02/24/98 04/06/98 Wonderware Corp Dvlp process control software Siehe PLC
02/26/98 09/30/98 Dresser Industries Inc Mnfr oil & gas field machinery Halliburton Co
03/02/98 08/03/98 Benchmarq Microelectronics Inc Mnfr microprocessors Unitrode Corp
03/02/98 08/17/98 DeepTech International Oil and gas exploration, prodn El Paso Natural Gas Co
03/02/98 05/19/98 Scopus Technology Inc Dvlp Client/server software Siebel Systems Inc
03/03/98 05/27/98 EVI Weatherford Inc Provide oil field services EVI Inc
03/05/98 05/20/98 XL Connect Solutions Inc Pvd integrated sys design svcs Xerox Corp
03/06/98 07/31/98 Alumax Inc Mnfr aluminum products Aluminum Co of America (Alcoa)
03/09/98 06/05/98 LCI International Inc Pvd telecommunications svcs Qwest Communications Corp
03/09/98 06/25/98 PriCellular Corp Pvd cellular telephone svcs American Cellular Corp
03/10/98 06/05/98 Portec Inc Mnfr railroad track components J Richard Industries Inc
03/11/98 07/16/98 Waste Management Inc Pvd chemical waste mgmt svcs USA Waste Services Inc
03/12/98 04/20/98 Metromail Corp Pvd direct-mail advg svcs Great Universal Stores PLC
03/13/98 07/31/98 MedCath Inc Pvd cardiology related svcs Investor Group
03/16/98 08/03/98 American General Hospitality Real estate investment trust CapStar Hotel Co
03/16/98 05/28/98 Logic Works Inc Develop client/server software PLATINUM Technology Inc
03/16/98 07/01/98 360 Communications Co Pvd telecommunication svcs ALLTEL Corp
03/17/98 07/31/98 BET Holdings Inc Own and operate TV stations Investor Group
03/17/98 05/27/98 ForeFront Group Inc Develop software CBT Group PLC
03/18/98 06/30/98 Medusa Corp Manufacture cement Southdown Inc
03/24/98 08/17/98 Insilco Corp Mnfr auto, elec, & electn parts DLJ Merchant Bkg Partners II
03/24/98 06/24/98 Walsh International Inc Provide programming svcs Cognizant Corp
03/27/98 07/01/98 Grand Prix Assoc Of Long Beach Own, op motorsport facilities Dover Downs Entertainment Inc
03/27/98 07/15/98 Intl Specialty Prods Mnfr speciality chemicals ISP Holdings Inc
03/30/98 05/11/98 Children's Discovery Centers Operate child care centers Knowledge Beginnings Inc
04/02/98 06/30/98 Security Capital Atlantic Inc Real estate investment trust Security Capital Pacific Trust
04/06/98 07/10/98 MoneyGram Payment Systems Inc Pvd money wire transfer svcs Viad Corp
04/06/98 07/31/98 Zero Corp Manufacture metal encasements Applied Power Inc
04/07/98 06/30/98 Beneficial Corp Pvd consumer financing svcs Household International Inc.
04/07/98 06/30/98 Green Tree Financial Corp Pvd consumer, coml finance svcs Conseco Inc
04/08/98 05/19/98 Blessings Corp Mnfr plastic film products Huntsman Packaging Corp
04/09/98 07/27/98 Claremont Technology Group Inc Pvd comp integrated sys svc Complete Business Solutions
04/09/98 05/15/98 Dart Group Corp Own, operate auto part stores Richfood Holdings Inc
04/13/98 07/31/98 Mariner Health Group Inc Provide sub-acute care svcs Paragon Health Network Inc
04/15/98 08/11/98 Harborside Healthcare Corp Pvd long-term med services Investcorp
04/16/98 09/28/98 Award Software International Develop software Phoenix Technologies Ltd
04/17/98 07/21/98 XcelleNet Inc Dvlp remote computing software Sterling Commerce Inc
04/20/98 09/15/98 Atria Communities Inc Provide residential care svcs Kapson Senior Quarters Corp
04/21/98 08/25/98 PCA International Inc Pvd photo processing services Investor Group
04/21/98 06/24/98 Tracor Inc Mnfr defense electronics General Electric Co PLC
04/27/98 07/09/98 Fluke Corp Mnfr electronic test equipment Danaher Corp
04/27/98 08/30/98 Vitalink Pharmacy Services Inc Pvd health and allied svcs Genesis Health Ventures Inc
04/27/98 06/01/98 Yuric Systems Inc Mnfr communications equip Lucent Technologies Inc
04/29/98 08/14/98 Neurex Corp Mnfr, whl biopharmaceuticals Elan Corp PLC
05/04/98 07/09/98 Echlin Inc Mnfr, whl automotive parts Dana Corp
05/04/98 06/29/98 Union Texas Petroleum Holdings Oil and gas exploration, prodn ARCO
05/06/98 08/06/98 Mountbatten Inc Surety insurance company Fidelity & Deposit Co of MD
05/08/98 06/15/98 Authentic Specialty Foods Inc Whl, mnfr Mexican foods Agrobios (Desc SA de CV)
05/13/98 06/26/98 Sage Laboratories Inc Mnfr electronic components Filtronic Comick PLC
05/14/98 09/25/98 New Plan Realty Trust Real estate investment trust Excel Realty Trust Inc
05/18/98 08/19/98 Mercantile Stores Co Inc Own, op department stores Dillard's Inc
05/18/98 08/07/98 RP Scherer Corp Mnfr soft gelatin capsules Cardinal Health Inc
05/18/98 08/26/98 Viking Office Products Inc Whl. retail office products Office Depot Inc.
05/25/98 10/01/98 US Surgical Corp Manufacture surgical staples Tyco International Ltd
05/26/98 08/24/98 Hyperion Software Corp Develop software Arbor Software Corp
05/27/98 09/17/98 May & Speh Inc Pvd computer-based direct mktg Acxioin Corp
05/28/98 07/07/98 Donnelley Enterprise Solutions Pvd info management services Bowne & Co Inc
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Value of Enter-
Trans- prise
Date Date Acquiror action Value
Announced Effective Target Name Business Description ($ mil) ($ mil)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
02/11/98 06/10/98 MTL Inc Investment company 250.10 250.36
02/11/98 05/20/98 Waverly Inc Publish newspapers,books 375.60 390.05
02/16/98 08/04/98 Coherent Communications Sys Mnfr voice data transport sys 664.30 514.18
02/17/98 05/27/98 Devon Group Inc Pvd digital prepress services 474.40 25.32
02/17/98 06/11/98 Zurn Industries Inc Mfnr consumer building prods 790.80 699.54
02/18/98 06/27/98 Republic Automotive Parts Inc Whl auto parts and supplies 62.80 85.90
02/19/98 04/21/98 Mastering Inc Develop integrated software 198.70 180.54
02/23/98 06/30/98 Money Store Inc. Commercial bank holding co 2,215.20 3,631.37
02/23/98 04/28/98 Trusted Information Systems Develop network software 322.10 255.45
02/24/98 04/06/98 Wonderware Corp Mnfr appliance controls 362.70 343.26
02/26/98 09/30/98 Dresser Industries Inc Mnfr oil field machinery 7,783.20 8,429.13
03/02/98 08/03/98 Benchmarq Microelectronics Inc Mnfr semiconductors, capacitors 150.60 145.10
03/02/98 08/17/98 DeepTech International Oil and gas exploration, prodn 375.40 526.65
03/02/98 05/19/98 Scopus Technology Inc Dvlp sales automation software 490.70 455.88
03/03/98 05/27/98 EVI Weatherford Inc Mnfr oil field products 2,670.70 2,826.43
03/05/98 05/20/98 XL Connect Solutions Inc Mnfr business machine; fin co 88.00 348.57
03/06/98 07/31/98 Alumax Inc manufacture aluminum products 3,944.20 3,698.41
03/09/98 06/05/98 LCI International Inc Pvd telephone commun svcs 4,401.40 4,808.21
03/09/98 06/25/98 PriCellular Corp Pvd cellular common services 1,385.20 1,070.55
03/10/98 06/05/98 Portec Inc Investment firm 76.50 79.77
03/11/98 07/16/98 Waste Management Inc Pvd waste disposal services 13,313.60 19,980.86
03/12/98 04/20/98 Metromail Corp Own, op mail order house 837.90 830.34
03/13/98 07/31/98 MedCath Inc Investor group 227.80 354.05
03/16/98 08/03/98 American General Hospitality Own, operate hotels 1,211.80 979.19
03/16/98 05/28/98 Logic Works Inc Develop integrated software 212.90 190.35
03/16/98 07/01/98 360 Communications Co Pvd telecommunication svcs 5,948.60 6,021.37
03/17/98 07/31/98 BET Holdings Inc Investor group 462.30 768.07
03/17/98 05/27/98 ForeFront Group Inc Dev educational software 147.50 127.13
03/18/98 06/30/98 Medusa Corp Mnfr cement; limestone mining 1,052.50 1,084.12
03/24/98 08/17/98 Insilco Corp Merchant banking firm 425.30 446.51
03/24/98 06/24/98 Walsh International Inc pvd information services 176.80 179.22
03/27/98 07/01/98 Grand Prix Assoc Of Long Beach Own, op race track, casinos 91.00 114.96
03/27/98 07/15/98 Intl Specialty Prods Mnfr industrial chemicals 324.50 2,125.81
03/30/98 05/11/98 Children's Discovery Centers Own, operate child care centers 89.10 98.06
04/02/98 06/30/98 Security Capital Atlantic Inc Real estate investment trust 1,681.40 1,688.36
04/06/98 07/10/98 MoneyGram Payment Systems Inc Provide food catering services 293.60 268.95
04/06/98 07/31/98 Zero Corp Mnfr tools, equip, consumables 431.60 456.24
04/07/98 06/30/98 Beneficial Corp Provide financial services 8,703.80 21,875.73
04/07/98 06/30/98 Green Tree Financial Corp Insurance holding company 7,358.80 8,515.19
04/08/98 05/19/98 Blessings Corp Prod printed, laminated films 269.70 244.61
04/09/98 07/27/98 Claremont Technology Group Inc Pvd computer programming svcs 282.50 278.53
04/09/98 05/15/98 Dart Group Corp Wholesale groceries 193.30 565.17
04/13/98 07/31/98 Mariner Health Group Inc Own, op nursing care facilities 622.30 1,089.72
04/15/98 08/11/98 Harborside Healthcare Corp Investment firm 263.20 280.42
04/16/98 09/28/98 Award Software International Develop systems software 129.50 101.81
04/17/98 07/21/98 XcelleNet Inc Dvlp electn commerce software 214.30 196.34
04/20/98 09/15/98 Atria Communities Inc Provide residential care svcs 238.90 501.89
04/21/98 08/25/98 PCA International Inc Investor group 210.40 268.01
04/21/98 06/24/98 Tracor Inc Mnfr radios and televisions 1,323.50 1,377.62
04/27/98 07/09/98 Fluke Corp Mnfr tools, control equipment 718.90 657.51
04/27/98 08/30/98 Vitalink Pharmacy Services Inc Own, op geriatric facilities 678.40 680.28
04/27/98 06/01/98 Yuric Systems Inc Mnfr telecom equip, software 1,044.10 1,002.06
04/29/98 08/14/98 Neurex Corp Mnfr drug delivery systems 824.50 800.83
05/04/98 07/09/98 Echlin Inc Mnfr motor vehicle products 4,124.80 4,345.06
05/04/98 06/29/98 Union Texas Petroleum Holdings Oil and gas exploration, prodn 2,741.40 3,124.56
05/06/98 08/06/98 Mountbatten Inc Surety insurance co 43.40 41.43
05/08/98 06/15/98 Authentic Specialty Foods Inc Mnfr, whl foods products 141.90 148.06
05/13/98 06/26/98 Sage Laboratories Inc Mnfr mobile telephone devices 20.20 16.61
05/14/98 09/25/98 New Plan Realty Trust Real estate investment trust 1,715.30 2,270.33
05/18/98 08/19/98 Mercantile Stores Co Inc Own, op department stores 2,943.10 3,022.02
05/18/98 08/07/98 RP Scherer Corp Whl pharmaceutical products 2,541.60 2,518.70
05/18/98 08/26/98 Viking Office Products Inc. Own. op stationerly stores 3,082.20 3,049.42
05/25/98 10/01/98 US Surgical Corp Mnfr fire protection systems 3,394.20 3.969.78
05/26/98 08/24/98 Hyperion Software Corp Dvlp software 837.30 751.40
05/27/98 09/17/98 May & Speh Inc Provide on-line database svcs 502.50 526.15
05/28/98 07/07/98 Donnelley Enterprise Solutions Pvd printing svcs 105.20 114.54
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Premium
----------------------------------------------------------------------------------
Date Date 1 Day Prior 1 Week Prior 4 Weeks Prior 3 Months Prior 1 Year Prior
Announced Effective Target Name to Annc. Date to Annc. Date to Annc. Date to Annc. Date to Annc. Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
02/11/98 06/10/98 MTL Inc 37.93 38.53 56.10 79.78 46.79
02/11/98 05/20/98 Waverly Inc 42.47 50.73 50.73 77.27 -3.11
02/16/98 08/04/98 Coherent Communications Sys 30.36 43.23 81.37 104.76 40.24
02/17/98 05/27/98 Devon Group Inc 29.19 32.03 37.91 108.07 52.10
02/17/98 06/11/98 Zurn Industries Inc 19.53 22.00 36.05 80.82 28.17
02/18/98 06/27/98 Republic Automotive Parts Inc 33.03 33.33 28.57 9.09 20.00
02/19/98 04/21/98 Mastering Inc 31.58 25.00 33.33 -1.96 36.99
02/23/98 06/30/98 Money Store Inc. 37.26 28.50 87.43 25.81 34.20
02/23/98 04/28/98 Trusted Information Systems 59.92 84.59 92.29 25.21 119.76
02/24/98 04/06/98 Wonderware Corp 50.00 59.34 79.44 125.88 32.41
02/26/98 09/30/98 Dresser Industries Inc 13.73 15.03 18.32 43.09 17.73
03/02/98 08/03/98 Benchmarq Microelectronics Inc 15.77 14.02 67.22 5.97 4.86
03/02/98 08/17/98 DeepTech International 8.74 9.80 15.46 138.30 30.23
03/02/98 05/19/98 Scopus Technology Inc 58.51 93.64 100.13 2.35 84.66
03/03/98 05/27/98 EVI Weatherford Inc 39.85 59.59 41.33 74.50 6.18
03/05/98 05/20/98 XL Connect Solutions Inc -11.11 15.11 22.14 180.70 19.40
03/06/98 07/31/98 Alumax Inc 35.08 33.26 36.25 30.83 52.85
03/09/98 06/05/98 LCI International Inc 22.18 24.21 54.84 133.33 55.20
03/09/98 06/25/98 PriCellular Corp 7.69 16.67 16.06 58.87 23.76
03/10/98 06/05/98 Portec Inc 8.48 13.78 10.35 43.82 13.27
03/11/98 07/16/98 Waste Management Inc 12.62 15.78 15.78 -12.03 5.07
03/12/98 04/20/98 Metromail Corp 32.69 28.37 30.19 117.32 77.49
03/13/98 07/31/98 MedCath Inc 15.15 10.95 34.51 26.67 26.67
03/16/98 08/03/98 American General Hospitality 56.60 58.43 52.01 27.67 37.49
03/16/98 05/28/98 Logic Works Inc 12.96 36.18 57.13 131.25 70.22
03/16/98 07/01/98 360 Communications Co 15.41 30.39 49.84 84.49 68.97
03/17/98 07/31/98 BET Holdings Inc 53.66 58.49 58.24 109.13 17.76
03/17/98 05/27/98 ForeFront Group Inc 17.27 29.36 48.50 258.63 81.91
03/18/98 06/30/98 Medusa Corp 17.16 24.29 35.28 60.58 53.29
03/24/98 08/17/98 Insilco Corp 4.65 11.11 12.85
03/24/98 06/24/98 Walsh International Inc 36.84 53.33 105.29 59.10
03/27/98 07/01/98 Grand Prix Assoc Of Long Beach 11.81 22.06 21.55 42.21 31.37
03/27/98 07/15/98 Intl Specialty Prods 4.29 1.74 14.51 43.14 22.18
03/30/98 05/11/98 Children's Discovery Centers 20.99 16.67 25.64 139.02 28.95
04/02/98 06/30/98 Security Capital Atlantic Inc 14.88 14.88 14.20 10.31 12.56
04/06/98 07/10/98 MoneyGram Payment Systems Inc 11.49 15.67 42.36 87.57 61.40
04/06/98 07/31/98 Zero Corp 16.46 17.99 33.18 84.27 24.56
04/07/98 06/30/98 Beneficial Corp 82.38 82.10 86.06 131.23 84.34
04/07/98 06/30/98 Green Tree Financial Corp 82.51 86.12 94.23 60.39 110.14
04/08/98 05/19/98 Blessings Corp 18.73 18.31 34.94 118.18 41.77
04/09/98 07/27/98 Claremont Technology Group Inc 21.35 77.05 118.18 21.35 60.00
04/09/98 05/15/98 Dart Group Corp 14.29 11.89 19.40 71.81 46.79
04/13/98 07/31/98 Mariner Health Group Inc 6.04 10.88 28.98 139.39 27.42
04/15/98 08/11/98 Harborside Healthcare Corp 18.34 22.70 5.82 117.39 35.59
04/16/98 09/28/98 Award Software International 12.83 21.34 53.12 44.54 96.40
04/17/98 07/21/98 XcelleNet Inc 6.11 12.55 7.73
04/20/98 09/15/98 Atria Communities Inc 2.53 7.29 -0.31 82.02 16.13
04/21/98 08/25/98 PCA International Inc 23.26 17.78 20.46 80.43 19.10
04/21/98 06/24/98 Tracor Inc 9.97 16.79 25.00 100.00 33.89
04/27/98 07/09/98 Fluke Corp 61.73 61.29 57.90 64.38 64.84
04/27/98 08/30/98 Vitalink Pharmacy Services Inc 13.57 12.15 6.51 23.29 6.51
04/27/98 06/01/98 Yuric Systems Inc 11.11 17.40 49.73 268.42 62.55
04/29/98 08/14/98 Neurex Corp 65.56 46.75 41.40 197.27 88.20
05/04/98 07/09/98 Echlin Inc 41.48 42.86 52.78 67.94 49.41
05/04/98 06/29/98 Union Texas Petroleum Holdings 41.46 46.84 36.47 53.64 49.68
05/06/98 08/06/98 Mountbatten Inc 2.46 6.18 4.29 66.86 24.26
05/08/98 06/15/98 Authentic Specialty Foods Inc 6.25 13.33 37.37 20.35
05/13/98 06/26/98 Sage Laboratories Inc 37.26 34.62 35.92 29.63 38.61
05/14/98 09/25/98 New Plan Realty Trust 13.43 15.44 14.29 29.55 11.49
05/18/98 08/19/98 Mercantile Stores Co Inc 9.12 9.59 15.42 56.48 19.40
05/18/98 08/07/98 RP Scherer Corp 17.47 23.34 30.06 83.76 51.76
05/18/98 08/26/98 Viking Office Products Inc 43.86 42.38 44.24 107.16 49.74
05/25/98 10/01/98 US Surgical Corp 7.91 25.73 39.73 35.01 51.62
05/26/98 08/24/98 Hyperion Software Corp 4.97 3.78 -3.57 114.87 -1.79
05/27/98 09/17/98 May & Speh Inc 2.65 12.58 20.35 58.64 34.23
05/28/98 07/07/98 Donnelley Enterprise Solutions 60.77 61.54 83.61 102.41 118.18
</TABLE>
Page F-13
<PAGE>
Merger Premiums to Market Value Analysis
Mergers with Target Price Equal to or Greater than $10 per Share
Announced and Completed 1/1/96-10/9/98
(continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date Date
Announced Effective Target Name Target Business Description Acquiror Name
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
06/04/98 09/08/98 DSC Communications Corp Dvlp, mnfr digital telecom sys Alcatel Alsthom CGE
06/04/98 07/20/98 Pollo Tropical Inc Own and operate restaurants Carrols Corp
06/10/98 08/18/98 Ceanic Corp Pvd subsea services, products Stolt Comex Seaway SA
06/10/98 09/25/98 Manor Care Inc Own, op nursing homes, hotels Health Care and Retirement
06/12/98 07/21/98 Triangle Pacific Corp Mnfr, whl wood cabinets Armstrong World Industries Inc
06/15/98 08/31/98 Bay Networks Inc Mnfr, whl data networking prods Northern Telecom Ltd (BCE Inc)
06/16/98 08/31/98 Personnel Management Inc Employment agency Linsalata Capital Partners
06/17/98 09/24/98 Intersolv Inc. Develop software products Micro Focus Group PLC
06/17/98 09/08/98 Nimbus CD International Inc Mnfr compact discs Carlton Communications PLC
06/18/98 07/28/98 ARCO Chemical Co (ARCO) Mnfr, whl intermediate chems Lyondell Petrochemical Co
06/18/98 09/24/98 PMT Services Inc Pvd credit card services NOVA Corp
06/19/98 08/31/98 Camco International Inc Mnfr oil, gas field equipment Schlumberger Technology Corp
06/22/98 08/31/98 Broderbund Software Inc Dvlp, whl educational software Learning Co Inc
06/24/98 10/05/98 Penederm Inc Mnfr pharmaceutical products Mylan Laboratories Inc
06/29/98 09/22/98 Dawson Production Services Inc Oil and gas exploration, prodn Key Energy Group Inc
06/29/98 09/30/98 Physio-Control International Mnfr, whl cardiac defibrilator Medtronic Inc
07/01/98 08/20/98 Leeg Inc Provide management services Metzler Group Inc
07/03/98 09/18/98 Saks Holdings (Investcorp Bk) Own and operate dept stores Proffitt's Inc
07/17/98 09/02/98 DeCrane Aircraft Holdings Inc Mnfr avionics components DLJ Merchant Banking Inc
07/20/98 10/06/98 General Signal Corp Mnfr electric control equip SPX Corp
09/29/98 10/07/98 Newmont Gold Co Gold mining Newmont Mining Corp
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Value of Enter-
Trans- prise
Date Date Acquiror action Value
Announced Effective Target Name Business Description ($ mil) ($ mil)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
06/04/98 09/08/98 DSC Communications Corp Mnfr telephone, common equip 4685.30 5084.93
06/04/98 07/20/98 Pollo Tropical Inc Own and operate restaurants 94.60 93.28
06/10/98 08/18/98 Ceanic Corp Pvd oil/gas contracting svcs 222.80 247.21
06/10/98 09/25/98 Manor Care Inc Own, operate nursing homes 2474.40 2986.16
06/12/98 07/21/98 Triangle Pacific Corp Mnfr interior furnishings 1124.30 1124.59
06/15/98 08/31/98 Bay Networks Inc Mnfr telecommunications equip 9268.60 9008.96
06/16/98 08/31/98 Personnel Management Inc Investment firm 34.90 37.50
06/17/98 09/24/98 Intersolv Inc. Manufacture lenses, computers 532.00 511.38
06/17/98 09/08/98 Nimbus CD International Inc Pvd motion picture prodn svcs 264.90 288.46
06/18/98 07/28/98 ARCO Chemical Co (ARCO) Mnfr petrochems, polyolefins 5645.70 6512.54
06/18/98 09/24/98 PMT Services Inc Pvd information retrieval svcs 1266.60 1238.70
06/19/98 08/31/98 Camco International Inc Develop software 3376.30 3307.25
06/22/98 08/31/98 Broderbund Software Inc Pvd serv dev consumer software 424.30 287.22
06/24/98 10/05/98 Penederm Inc Mnfr, whl pharmaceuticals 193.10 190.48
06/29/98 09/22/98 Dawson Production Services Inc Pvd oil well services 348.80 309.40
06/29/98 09/30/98 Physio-Control International Mnfr medical technology prods 529.10 543.04
07/01/98 08/20/98 Leeg Inc Pvd business consulting svcs 294.40 272.58
07/03/98 09/18/98 Saks Holdings (Investcorp Bk) Own and operate dept stores 3282.30 3381.20
07/17/98 09/02/98 DeCrane Aircraft Holdings Inc Merchant banking firm 181.50 174.11
07/20/98 10/06/98 General Signal Corp Mnfr engine components, tools 2318.70 2309.41
09/29/98 10/07/98 Newmont Gold Co Gold, coal mining, oil, gas expl 264.80 4235.41
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Premium
----------------------------------------------------------------------------------
Date Date 1 Day Prior 1 Week Prior 4 Weeks Prior 3 Months Prior 1 Year Prior
Announced Effective Target Name to Annc. Date to Annc. Date to Annc. Date to Annc. Date to Annc. Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
06/04/98 09/08/98 DSC Communications Corp 81.64 111.91 98.67 46.71 105.08
06/04/98 07/20/98 Pollo Tropical Inc 10.00 7.32 18.12 66.04 37.50
06/10/98 08/18/98 Ceanic Corp 29.56 34.45 79.78 52.38
06/10/98 09/25/98 Manor Care Inc 21.77 25.31 17.97 21.29 (1.47)
06/12/98 07/21/98 Triangle Pacific Corp 26.14 26.50 24.02
06/15/98 08/31/98 Bay Networks Inc 34.97 18.49 44.88 61.74 59.21
06/16/98 08/31/98 Personnel Management Inc 25.49 23.08 23.08 66.23 21.90
06/17/98 09/24/98 Intersolv Inc. 56.16 41.05 52.09 161.01 24.91
06/17/98 09/08/98 Nimbus CD International Inc 6.98 5.75 10.84 8.24 12.20
06/18/98 07/28/98 ARCO Chemical Co (ARCO) 14.22 12.27 3.36 23.20 18.92
06/18/98 09/24/98 PMT Services Inc 21.98 35.54 31.98 57.25 53.65
06/19/98 08/31/98 Camco International Inc 32.57 39.88 19.50 51.78 36.41
06/22/98 08/31/98 Broderbund Software Inc 21.21 16.36 18.96 (19.60) (16.23)
06/24/98 10/05/98 Penederm Inc 38.97 39.52 88.28 76.89 75.12
06/29/98 09/22/98 Dawson Production Services In 40.70 50.54 66.67 29.63 38.61
06/29/98 09/30/98 Physio-Control International 19.57 31.74 31.34 86.44 57.14
07/01/98 08/20/98 Leeg Inc 46.50 48.98 41.77 69.08
07/03/98 09/18/98 Saks Holdings (Investcorp Bk) 34.46 39.02 40.85 39.55 (12.07)
07/17/98 09/02/98 DeCrane Aircraft Holdings Inc 30.50 28.67 33.82 33.33 31.90
07/20/98 10/06/98 General Signal Corp 19.60 22.66 19.40 (13.46) 0.28
09/29/98 10/07/98 Newmont Gold Co (5.16) 20.81 62.37 (44.55) 4.35
Mean: 28.1% 32.7% 39.6% 77.9% 53.2%
</TABLE>
Source: Securities Data Company, Inc.; Three month and one-year premiums
calculated using security prices from FactSet Research Systems, Inc. Commercial
banks and other similar financial institutions were excluded for the purpose of
this analysis.
Page F-14
<PAGE>
RELATIVE CONTRIBUTION ANALYSIS (a)
($ IN THOUSANDS)
STAR GAS' AVERAGE
GROSS PROFIT
CONTRIBUTION
96-97 26.7%
98-99 28.8%
96-99 27.8%
STAR GAS' AVERAGE
EBITDA CONTRIBUTION
96-97 35.4%
98-99 32.8%
96-99 34.0%
[_] A.G. Edwards analyzed the relative pro forma contribution of both Star Gas
and Petro to the ownership of capital in the pro forma entity based on Star
Gas' and Petro's historical results from operations and their respective
projections.
[GROSS PROFIT CHART APPEARS HERE]
[EBITDA (c) CHART APPEARS HERE]
______________________________________
(a) For purposes of its analysis, A.G. Edwards converted Petro's historical
December 31st fiscal year-end to a September 30th fiscal year-end for
comparison purposes. Petro's projections are based on a December 31st
calendar year end. Other measures of relative contribution analysis are
non-meaningful.
(b) Assumes normalized weather.
(c) Includes only heating oil EBITDA for Petro.
Page G-1
<PAGE>
RELATIVE CONTRIBUTION ANALYSIS
($ IN THOUSANDS)
(continued)
FOR STAR GAS' CONTRIBUTION IMPLIED FIRM VALUE
OF APPROXIMATELY 27.8% OF THE
COMBINED ENTITY'S GROSS [PIE CHART APPEARS HERE]
PROFIT AND 34.0% OF THE COMBINED
ENTITY'S EBITDA, IT WILL RECEIVE
APPROXIMATELY 37.1% OF THE
IMPLIED FIRM VALUE.
Page G-2
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
[_] A.G. Edwards performed discounted cash flow
analyses for Petro, Star Gas and Star Gas Pro
Forma using projected tax-adjusted operating cash
flows for 1999 through 2002, terminal values
calculated on 2002 EBITDA, and discount rates
based on the related weighted average cost of
capital.
Assumptions:
[_] Weighted average cost of capital ("WACC")
- Petro Stand Alone of 13.4% to 13.9%
(calculated WACC of 13.6%)
- Star Gas Stand Alone of 6.8% to 7.2%
(calculated WACC of 7.0%)
- Star Gas Pro Forma of 7.3% to 7.7%
(calculated WACC of 7.5%)
[_] Terminal value EBITDA multiple
- Petro Stand Alone of 6.0x to 8.0x (calculated
normalized 1998 EBITDA multiple of 6.5x)
- Star Gas Stand Alone and Star Gas Pro Forma
of 9.0x to 11.0x (calculated normalized 1998
EBITDA multiple of 10.6x)
Page H-1
<PAGE>
Discounted Cash Flow Analysis
(continued)
Petro Stand Alone
------------------------------------------------------------
Terminal Value EBITDA Multiple
30 Year
-------------------------------------------------
6.0x 6.5x 7.0x 7.5x 8.0x
------------------------------------------------------------
13.4% $ 64,921 $ 81,662 $ 98,403 $ 115,143 $ 131,884
WACC 13.6% 62,511 79,110 95,709 112,308 128,908
13.9% 60,124 76,583 93,042 109,502 125,961
------------------------------------------------------------
Star Gas Stand Alone
------------------------------------------------------------
Terminal Value EBITDA Multiple
30 Year
-------------------------------------------------
9.0x 9.5x 10.0x 10.5x 11.0x
------------------------------------------------------------
6.8% $103,675 $110,428 $117,181 $ 123,935 $ 130,688
WACC 7.0% 102,537 109,240 115,942 122,645 129,347
7.2% 101,410 108,062 114,714 121,367 128,019
------------------------------------------------------------
Star Gas Pro Forma
------------------------------------------------------------
Terminal Value EBITDA Multiple
30 Year
-------------------------------------------------
9.0x 9.5x 10.0x 10.5x 11.0x
------------------------------------------------------------
7.3% $139,743 $148,282 $156,820 $ 165,358 $ 173,896
WACC 7.5% 138,338 146,815 155,291 163,767 172,243
7.7% 136,946 145,360 153,775 162,190 170,605
------------------------------------------------------------
Page H-2
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
PETRO -- STAND ALONE
EXCLUDING DISTRIBUTIONS FROM STAR GAS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
====================================================================================================================================
NORMALIZED
CASH FLOW SUMMARY (a): 1998 1999 2000 2001 2002 TERMINAL
- ---------------------- ------------ ------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
EBITDA $46,900 $48,706 $51,196 $53,390 $55,385
Taxes (500) (500) (500) (500) (500)
Maintenance capital expenditures (3,000) (3,060) (3,121) (3,184)
Working capital increases (b) (500) (500) (500) (500)
------- ------- ------- -------
Net operating cash flow (free cash flow) 44,706 47,136 49,269 51,201
--------------
WEIGHTED AVERAGE COST OF CAPITAL (C) 13.6%
--------------
--------------
Terminal EBITDA multiple (d) 6.5x
--------------
Discount factor 0.8799 0.7742 0.6812 0.5994 0.5994
Terminal value (e) $360,003
--------------
PRESENT VALUE $355,875 $39,337 $36,494 $33,564 $30,691 $215,791
-------------- ------- ------- ------- ------- --------
Current net debt and preferred stock (f) ($276,765)
--------------
--------------
NET PRESENT VALUE OF EQUITY $ 79,110
--------------
</TABLE>
___________________________________________________________
(a) Based on management projections.
(b) A.G. Edwards' estimate.
(c) Based on comparable companies' WACC.
(d) Petro's current firm value of $304.4 million/$46.9 million normalized
1998 EBITDA = 6.5x, which represents a multiple of current year
normalized EBITDA.
(e) Terminal value calculated using EBITDA multiple.
(f) Net of $33.2 million of cash. Market value of debt used.
Page H-3
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
PETRO - STAND ALONE USING STAR GAS' PRO FORMA WACC
EXCLUDING DISTRIBUTIONS FROM STAR GAS
($ in thousands)
<TABLE>
<CAPTION>
====================================================================================================================================
NORMALIZED
CASH FLOW SUMMARY (a): 1998 1999 2000 2001 2002 TERMINAL
- ----------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
EBITDA $46,900 $48,706 $51,196 $53,390 $55,385
Taxes (500) (500) (500) (500) (500)
Maintenance capital expenditures (3,000) (3,060) (3,121) (3,184)
Working capital increases (b) (500) (500) (500) (500)
---------- ---------- ---------- ----------
Net operating cash flow
(free cash flow) 44,706 47,136 49,269 51,201
-----------------
WEIGHTED AVERAGE COST OF CAPITAL (c) 7.5%
-----------------
-----------------
TERMINAL EBITDA MULTIPLE (d) 6.5x
-----------------
Discount factor 0.9299 0.8647 0.8041 0.7477 0.7477
Terminal value (e) $360,003
-----------------
PRESENT VALUE $429,392 $41,571 $40,758 $39,615 $38,282 $269,166
----------------- ---------- ---------- ---------- ---------- ----------
Current net debt and preferred
stock (f) ($276,765)
-----------------
=================
NET PRESENT VALUE OF EQUITY $152,627
=================
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on management projections.
(b) A.G. Edwards' estimate.
(c) Based on comparable companies' WACC.
(d) Petro's current term value of $304.4 million/$46.9 million normalized 1998
EBITDA = 6.5x, which represents a multiple of current year normalized
EBITDA.
(e) Terminal value calculated using EBITDA multiple.
(f) Net of $33.2 million of cash. Market value of debt used.
Page H - 4
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
STAR GAS - STAND ALONE
($ IN THOUSANDS)
<TABLE>
<CAPTION>
==========================================================================================================================
NORMALIZED
INCOME STATEMENT SUMMARY (a): 1998 1999 2000 2001 2002 TERMINAL
- ---------------------------- ---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
EBITDA 22,135 24,491 26,029 27,566 29,104
% increase 10.6% 6.3% 5.9% 5.6%
Net income 2,799 3,297 3,281 3,439 3,761
CASH FLOW SUMMARY:
- -----------------
After-tax EBI 12,108 12,658 13,317 14,141
Depreciation and amortization 12,358 13,346 14,224 14,938
Maintenance capital expenditures (2,632) (2,679) (2,728) (2,777)
Working capital increases (b) (500) (500) (500) (500)
------- ------- ------- -------
Net operating cash flow (free cash flow) 21,334 22,825 24,313 25,802
-------------
WEIGHTED AVERAGE COST OF CAPITAL (c) 7.0%
-------------
-------------
TERMINAL EBITDA MULTIPLE (d) 10.6x
-------------
Discount factor 0.9342 0.8728 0.8154 0.7618 0.7618
Terminal value (e) $308,502
-------------
PRESENT VALUE $314,355 $19,931 $19,922 $19,825 $19,656 $235,020
------------- ------- ------- ------- ------- --------
Current net debt (f) ($109,285)
-------------
NET PRESENT VALUE OF EQUITY $205,070
=============
Common units/Total units (g) 60.5%
=============
EQUITY VALUE TO COMMON UNITS (h) $123,985
=============
- --------------------------------------------------------------------------------
</TABLE>
(a) Based on management projections.
(b) A.G. Edwards' estimate.
(c) Based on comparable companies' WACC.
(d) Star's current firm value of $234.1 million $22.1 million normalized 1998
EBITDA = 10.6x, which represents a multiple of current year normalized
EBITDA.
(e) Terminal value calculated using EBITDA multiple.
(f) Represents total projected 9/30/98 debt less cash.
(g) Total units include common, subordinated and GP units.
(h) Current market value of common units is 3,858 units* $19.563 unit price =
$75,472
Page H-5
<PAGE>
Discounted Cash Flow Analysis
Star Gas - Pro Forma
($ in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Normalized
Income Statement Summary (a): 1998 1999 2000 2001 2002 Terminal
- ------------------------ ---------- -------- -------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
EBITDA 69,535 73,697 77,725 81,456 84,989
% increase 6.0% 5.5% 4.8% 4.3%
Net income (102) (456) (4,315) (7,751) (10,944)
Cash Flow Summary:
- ------------------
After-tax EBI 29,012 27,234 25,266 23,258
Depreciation and amortization 43,661 49,466 55,166 60,705
Maintenance capital expenditures (5,632) (5,739) (5,849) (5,961)
Working capital increases (b) (1,000) (1,000) (1,000) (1,000)
-------- -------- --------- ----------
Net operating cash flow (free cash flow) 66,041 69,961 73,583 77,002
----------------
Weighted average cost of capital (c) 7.5%
----------------
----------------
Terminal EBITDA multiple (d) 10.6
----------------
Discount factor 0.9299 0.8647 0.8041 0.7477 0.7477
Terminal value (e) $900,883
----------------
Present value $912,213 $61,410 $60,494 $59,165 $57,573 $673,571
---------------- ------- ------- ------- ------- --------
Less net debt (f) ($291,997)
----------------
Net present value of equity $620,216
================
Original common units/Total units (g) 26.7%
----------------
Equity value to common units (h) $165,462
----------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on management projections. See Appendix K for model.
(b) A.G. Edwards' estimate.
(c) Based on comparable companies' WACC.
(d) Star's current firm value of $234.1 million/$22.1 million normalized 1998
EBITDA = 10.6x, which represents a multiple of current year normalized
EBITDA.
(e) Terminal value calculated using EBITDA multiple.
(f) Represents total proforma projected 9/30/98 debt less cash and cash
collateral.
(g) Total units include common, newly issued common, senior subordinated,
subordinated and GP units.
(h) Current market value of common units is 3,858 units *$19.563 unit price =
$75,472.
Page H-6
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
PETRO - STAND ALONE
WEIGHTED AVERAGE COST OF CAPITAL DERIVATION
($ in millions)
================================================================================
<TABLE>
<CAPTION>
TOTAL IMPLIED TOTAL TOTAL
MARKET UNIT TOTAL MARKET DEBT/ DEBT AS % UN-
LEVERED VAL. DEBT PRICE AT UNITS VALUE OF TOTAL OF TOTAL LEVERED
COMPARABLE COMPANY BETA (a) (BK = MKT) (10/14/98) OUT. (MIL) EQUITY EQUITY CAPITAL BETA
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriGas Partners, L.P. 0.42 $711.1 $24.125 41.9 $1,031.2 69.0% 40.8% 0.249
Cornerstone Propane Partners, L.P. 0.45 240.9 18.000 19.9 365.2 66.0% 39.8% 0.271
Ferrellgas Partners, L.P. 0.46 504.1 20.000 31.3 638.6 78.9% 44.1% 0.257
Heritage Propane Partners, L.P. 0.42 177.8 20.813 8.5 180.0 98.8% 49.7% 0.211
National Propane Partners, L.P. 0.61 145.5 9.438 11.2 108.2 134.5% 57.4% 0.260
Star Gas Partners, L.P. 0.39 109.8 19.563 6.3 124.9 87.9% 46.8% 0.208
Suburban Propane Partners, L.P. 0.40 427.9 19.625 28.7 575.3 74.4% 42.7% 0.229
----------------------------------------------------------
Petro's capitalization - at market
Comparable group's average unlevered beta: 0.24 Total debt (b) $310.0 91.8%
Petro's debt - to - equity ratio: 1123.5% Common equity 27.6 8.2%
------ -----
Petro's debt as a percent of total capital: 91.8% $337.6 100.0%
----------------------------------------------------------
Comparable group's beta relevered for Petro's capital structure: 2.945%
=====
DERIVATION OF WEIGHTED AVERAGE COST OF CAPITAL:
- ----------------------------------------------
MARKET RISK PREMIUM RANGE (e)
---------------------------------
11.3% 12.3% 13.3%
---------------------------------
Petro's theoretical levered beta (d): 2.945
Assumed % of equity in Petro's capital structure: 8.2%
Risk - free rate of return (c): 4.6%
Petro's cost of equity range (at various market risk premiums): 37.9% 40.8% 43.8%
==== ==== ====
Petro's assumed tax rate: 0.0%
Assumed % of debt in capital structure (b): 91.8%
Petro's estimated cost of debt (f): 11.2%
Petro's estimated after - tax cost of debt: 11.2% 11.2% 11.2% 11.2%
---------------------------------
Petro's weighted average cost of capital range (g): 13.4% 13.6% 13.9%
---------------------------------
</TABLE>
_______________________________________________
(a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the
number of weeks available, which may be less than 143) adjusted beta
relative to the S&P 500 index.
(b) Includes preferred stock; not net of cash.
(c) Ten - year Treasury rate on October 14, 1998.
(d) Bloomberg's reported beta for Petro is .60.
(e) Ibbotson Associates 1997. Total returns for small company stocks of 17.7%
minus the risk-free rate.
(f) Based on Petro's current debt structure.
(g) Calculation based upon use of the capital Asset Pricing Model (CAPM).
Page H-7
<PAGE>
<TABLE>
<CAPTION>
Discounted Cash Flow Analysis
Star Gas -- Stand Alone
Weighted Average Cost of Capital Derivation
($ in millions)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Implied Total Total
Market Unit Total Market Debt/ Debt as % Un-
Levered Val. Debt Price at Units Value of Total of Total levered
Comparable Company Beta (a) (Bk=Mkt) (10/14/98) Out. (Mil) Equity Equity Capital Beta
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriGas Partners, L.P. 0.42 $711.1 $24.125 41.9 $1,031.2 69.0% 40.8% 0.249
Cornerstone Propane Partners, L.P. 0.45 240.9 18.000 19.9 365.2 66.0% 39.8% 0.271
Ferrellgas Partners, L.P. 0.46 504.1 20.000 31.3 638.6 78.9% 44.1% 0.257
Heritage Propane Partners, L.P. 0.42 177.8 20.813 8.5 180.0 98.8% 49.7% 0.211
National Propane Partners, L.P. 0.61 145.5 9.438 11.2 108.2 134.5% 57.4% 0.260
Star Gas Partners, L.P. 0.39 109.8 19.563 6.3 124.9 87.9% 46.8% 0.208
Suburban Propane Partners, L.P. 0.40 427.9 19.625 28.7 575.3 74.4% 42.7% 0.229
<CAPTION>
<S> <C> <C>
Star's capitalization -
at market (b)
Comparable group's average unlevered beta: 0.24 Total debt $109.8 46.8%
Star's debt-to-equity ratio (b): 87.9% Common equity 124.9 53.2%
Star's debt as a percent of total capital (b): 46.8% --------- -----
Comparable group's beta relevered for Star's capital structure 0.378% $234.6 100.0%
=====
<CAPTION>
Derivation of Weighted Average Cost of Capital: Market Risk Premium Range (d)
- ---------------------------------------------- --------------------------------------
11.3% 12.3% 13.3%
--------------------------------------
<S> <C> <C> <C> <C>
Star's theoretical levered beta: 0.378
Assumed % of equity in Star's capital structure (b): 53.2%
Risk-free rate of return (c): 4.6%
Star's cost of equity range (at various market risk premiums): 8.9% 9.3% 9.6%
Star's assumed tax rate: 35.0% ==== ==== ====
Assumed % of debt in capital structure (b): 46.8%
Star's estimated cost of debt (e): 6.9%
Star's estimated after-tax cost of debt: 4.5% 4.5% 4.5% 4.5%
--------------------------------------
Star's weighted average cost of capital range (f): 6.8% 7.0% 7.2%
</TABLE>
- ----------------------------------------
(a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the
number of weeks available, which may be less than 143) adjusted beta
relative to the S&P 500 Index.
(b) Market value of debt is assumed to equal book value; debt is not net of
cash.
(c) Ten-year Treasury rate on October 14, 1998.
(d) Ibbotson Associates 1997. Total returns for small company stocks of 17.7%
minus the risk-free rate.
(e) Based on Star current debt structure.
(f) Calculation based upon use of the Capital Asset Pricing Model (CAPM).
Page H-8
<PAGE>
Discounted Cash Flow Analysis
Star Gas - Pro Forma
Pro Forma Weighted Average Cost of Capital Derivation
($ in millions)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Total Implied Total Total
Market Unit Total Market Debt/ Debt as % Un-
Levered Val. Debt Price at Units Value of Total of Total levered
Comparable Company Beta (a) (Bk = Mkt) (10/14/98) Out. (Mil) Equity Equity Capital Beta
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriGas Partners, L.P. 0.42 $711.1 $24.125 41.9 $1,031.2 69.0% 40.8% 0.249
Cornerstone Propane Partners, L.P. 0.45 240.9 18.000 19.9 365.2 66.0% 39.8% 0.271
Ferrellgas Partners, L.P. 0.46 504.1 20.000 31.3 638.6 78.9% 44.1% 0.257
Heritage Propane Partners, L.P. 0.42 177.8 20.813 8.5 180.0 98.8% 49.7% 0.211
National Propane Partners, L.P. 0.61 145.5 9.438 11.2 108.2 134.5% 57.4% 0.260
Star Gas Partners, L.P. 0.39 109.8 19.563 6.3 124.9 87.9% 46.8% 0.208
Suburban Propane Partners, L.P. 0.40 427.9 19.625 28.7 575.3 74.4% 42.7% 0.229
<CAPTION>
<S> <C> <C> <C> <C>
Comparable group's average unlevered beta: 0.24 -------------------------------------------
Pro forma debt - to - equity ratio (b): 113.5% Pro forma capitalization - at market (b)
Pro forma debt as a percent of total Total debt $313.9 53.2%
capital (b): 53.2% Total equity 276.5 46.8%
Comparable group's beta relevered for ------ -----
Pro Forma capital structure 0.418 $590.5 100.0%
====== --------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Derivation of Weighted Average Cost of Capital: Market Risk Premium Range (d)
- ----------------------------------------------- -----------------------------
<S> <C> <C> <C> <C>
Pro forma theoretical levered beta: 0.418 11.3% 12.3% 13.3%
Assumed % of equity in Pro forma capital -----------------------------
structure (b): 46.8%
Risk - free rate of return (c): 4.6%
Pro forma cost of equity range (at various
market risk premiums): 9.3% 9.8% 10.2%
Pro forma assumed tax rate: 35.0% ===== ===== =====
Assumed % of debt in capital structure (b): 53.2%
Pro forma estimated cost of debt (e): 8.6%
Pro forma estimated after - tax cost of debt: 5.6% 5.6% 5.6% 5.6%
-----------------------------
Pro forma weighted average cost of capital range (f): 7.3% 7.5% 7.7%
- --------------------------------------------------------------- -----------------------------
</TABLE>
(a) Source: Bloomberg. 143 week (maximum weekly time period allowed, or the
number of weeks available, which may be less than 143) adjusted beta
relative to the S&P 500 index.
(b) Market value of debt is assumed to equal book value. See page C-6 for
equity calculation.
(c) Ten-Year Treasury rate on October 14, 1998.
(d) Ibbotson Associates 1997. Total returns for small company stocks of 17.7%
minus the risk-free rate.
(e) Based on Pro forma debt structure.
(f) Calculation based upon use of the Capital Asset Pricing Model (CAPM).
Page H-9
<PAGE>
COMPARABLE TRANSACTIONS ANALYSIS
FIRM VALUATION
[_] A.G. Edwards noted that public disclosure regarding transactions in the
retail home heating oil distribution industry was extremely limited.
[_] A.G. Edwards analyzed the financial terms related to divestitures by
Petro of certain of its retail home heating oil branches and compared
them to the implied multiples of the aggregate purchase price of Petro's
heating oil assets.
[_] Petro has sold three branches for an average EBITDA multiple of 9.0x.
[_] A.G. Edwards calculated the purchase price of Petro's heating oil assets
and calculated multiples based on Petro's EBITDAs.
========================================================================
PURCHASE PRICE OF HEATING OIL ASSETS
------------------------------------
Equity purchase price of heating oil assets
including CUs (see page C-5) $25,549
Cost of Debt to be Redeemed ($206,250 + $2,844 premium) 209,094
Cost of Debt to be Assumed 69,646
Cost of Preferred stock at Redemption Value 31,767
Consent Fees 2,110
Transaction Fees 19,343
---------
Aggregate purchase price of heating oil assets $ 357,509
=========
<TABLE>
<CAPTION>
Multiples
----------------------------------
Multiples Notes
-------------- ----------------------------------------
<S> <C> <C> <C>
1997 Normalized EBITDA (a) 43,040 8.3 x As a multiple of aggregate transaction value
Normalized 1998 EBITDA budget (a) 46,900 7.6 x As a multiple of aggregate transaction value
1999 Projected EBITDA (a) 48,706 7.3 x As a multiple of aggregate transaction value
--------------
</TABLE>
_______________________________________
(a) Calculated as gross profit minus SG&A expense and direct delivery
expense.
Page I-1
<PAGE>
PUBLIC COMPANY ANALYSIS
[__] A.G. Edwards compared certain financial and market information of Star
Gas on a historical and pro forma basis to that of certain public
propane master limited partnerships which A.G. Edwards deemed relevant
for the purposes of this analysis. In addition to Star Gas, A.G. Edwards
reviewed the trading multiples from a total of six master limited
partnerships.
[__] The selected propane master limited partnerships are as follows:
- AmeriGas Partners, L.P. - Heritage Propane Partners, L.P.
- Cornerstone Propane Partners, L.P. - National Propane Partners, L.P.
- Ferrellgas Partners, L.P. - Suburban Propane Partners, L.P.
[__] No company used in the analysis is identical to Star Gas.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
PUBLIC COMPARABLE COMPANIES (a)
----------------------------------------------------------------------------------------------------
PUBLIC PUBLIC
PRO FORMA COMPANY COMPANY
STAR STAR MEDIANS RANGES
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Yield 11.2% 11.8% 10.1% 9.1% to 22.3%
Firm value/LTM EBITDA 12.5x (b) 10.0x (b) 11.6x 9.0x to 12.7x
Firm value/1999E EBITDA 9.6x 7.7x 9.2x 8.4x to 11.1x
Equity Market Cap/LTM DCF 15.4x (c) 12.5x (c) 13.4x 8.1x to 15.3x
Equity Market Cap/1999E DCF 9.6x 7.4x 9.8x 4.9x to 12.2x
LTM common unit coverage 1.0x (d) 0.9x (d) 1.5x 0.6x to 1.6x
1999E common unit coverage 1.5x 1.5x 2.1x 1.1x to 2.3x
LTM total unit coverage 0.6x (d) 0.7x (d) 0.7x 0.4x to 1.2x
1999E total unit coverage 0.9x 1.1x 1.0x 0.7x to 1.2x
---------------------------------------------------------------------------------------------------
</TABLE>
(a) Public comparable companies include: APU, CNO, FGP,HPG, NPL AND
SPH.
(b) Firm value/adjusted for actual 1998 budget EBITDA.
(c) Equity market cap/adjusted for actual 1998 budget EBITDA.
(d) Adjusted for actual 1998 budget.
Page J-1
<PAGE>
Public Company Analysis
($ in millions, except per unit data)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Closing Implied
Price Market Implied Common
on Value Firm Distribution Units/
Company Ticker (10/14/98) of Equity Value per Unit Yield Total Units
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Star Gas Partners, L.P. (a) SGU $19.563 $ 124.9 $ 234.1 $2.20 11.2% 60.5%
AmeriGas Partners, L.P. APU 24.125 1,031.2 1,739.4 2.20 9.1% 52.8%
Cornerstone Propane Partners, L.P. (c) CNO 18.000 365.2 596.7 2.16 12.0% 66.8%
Ferrellgas Partners, L.P. (d) FGP 20.000 638.6 1,131.2 2.00 10.0% 47.0%
Heritage Propane Partners, L.P. HPG 20.813 180.0 354.6 2.00 9.6% 56.3%
National Propane Partners, L.P. NPL 9.438 108.2 250.9 2.10 22.3% 59.6%
Suburban Propane Partners, L.P. (c) SPH 19.625 575.3 922.5 2.00 10.2% 75.1%
- ------------------------------------------------------------------------------------------------------------------------
Mean 12.2% 59.6%
Median 10.1% 58.0%
- ------------------------------------------------------------------------------------------------------------------------
Pro Forma $19.563 $276.5 (f) $568.5 (g) $2.30 11.8% 74.9%
LTM Common LTM Total FY99E FY99E Common FY99E Total
Company Unit Coverage Unit Coverage DCF/Unit Unit Coverage Unit Coverage
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Star Gas Partners, L.P. 1.0x (b) 0.6x (h) $2.02 1.5x 0.9x
AmeriGas Partners, L.P. 1.4x 0.8x 2.39 2.1x 1.1x
Cornerstone Propane Partners, L.P. 0.8x 0.6x 1.51 1.1x 0.7x
Ferrellgas Partners, L.P. 1.5x 0.7x 2.15 2.3x 1.1x
Heritage Propane Partners, L.P. 1.5x 0.8x 2.38 2.2x 1.2x
National Propane Partners, L.P. 0.6x 0.4x 1.87 NA 0.9x
Suburban Propane Partners, L.P. 1.6x 1.2x 1.98 1.3x 1.0x
- --------------------------------------------------------------------------------------------------------------------------------
Mean 1.3x 0.7x 1.8x 1.0x
Median 1.5x 0.7x 2.1x 1.0x
- --------------------------------------------------------------------------------------------------------------------------------
Pro Forma 0.9x (b) 0.7x (b) 2.60 1.5x 1.1x
</TABLE>
- -------------------------------------------------------
1999 estimates per A.G. Edwards' research, except for Star and Pro Forma. 1999
estimates for National Propane from Merrill Lynch research report dated
July 29, 1998.
Implied Firm Value equals common, subordinated and GP units multiplied by the
market price of common units plus debt, less cash.
(a) Pro Forma for the Pearl Gas acquisition and the common unit offering.
(b) For Star and Pro Forma only, LTM DCF figures are adjusted for actual 1998
budget DCF estimates.
(c) Financial information pro forma for common unit offering. Maintenance
capital expenditures assumed to be 8% of EBITDA due to lack of disclosure.
(d) Maintenance capital expenditures assumed to be 8% of EBITDA due to lack of
disclosure.
(e) Financial figures exclude $5.1 million gain from sale of minority interest.
(f) Calculated as: (10,841 common units X $19,563)+(2,767 senior subordinated
units X $18.52)+ (857 junior subordinated and GP units X $15.41).
(g) $276.5 in equity plus $313.9 pro forma debt, less $21.9 cash and cash
collateral.
Page J-2
<PAGE>
PUBLIC COMPANY ANALYSIS
($ IN MILLIONS, EXCEPT PER UNIT DATA)
(continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
LONG TERM LTM FIRM VALUE/ FIRM VALUE/ EQUITY EQUITY
DEBT/ EBITDA/ LTM 1999E MARKET CAP/ MARKET CAP/
FIRM VALUE INT. EXP. EBITDA EBITDA LTM DCF 1999E DCF
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
STAR GAS PARTNERS, L.P. 44.8% 2.4x (a) 12.5x (a) 9.6x 15.4x (a) 9.6x
AmeriGas Partners, L.P. 39.9% 2.2x 11.8x 9.9x 14.8x 10.4x
Cornerstone Propane Partners, L.P. 39.7% 2.4x 12.7x 11.1x 15.3x 12.2x
Ferrellgas Partners, L.P. 44.1% 2.1x 11.4x 9.0x 14.2x 9.5x
Heritage Propane Partners, L.P. 49.8% 2.6x 9.7x 9.0x 12.6x 8.8x
National Propane Partners, L.P. 55.2% 2.6x 12.7x 9.3x 12.0x 4.9x
Suburban Propane Partners, L.P. 46.4% 3.3x 9.0x 8.4x 8.1x 10.1x
- ---------------------------------------------------------------------------------------------------------------------------
MEAN 45.8% 2.6x 11.2x 9.5x 12.9x 9.3x
MEDIAN 45.2% 2.5x 11.6x 9.2x 13.4x 9.8x
- ---------------------------------------------------------------------------------------------------------------------------
PRO FORMA 55.2% 2.0x (a) 10.0x (a) 7.7x 12.5x (a) 7.4x
</TABLE>
______________________________________________________________________________
EBITDA is defined as net income (loss) before extraordinary items plus interest,
income taxes, depreciation and amortization, impairment expense, and other
non-recurring and non-operating items.
(a) For Star and Pro forma only, LTM figures use adjusted for actual 1998 budget
estimates.
Page J-3
<PAGE>
PUBLIC COMPANY DESCRIPTIONS
AMERIGAS PARTNERS, L.P. AmeriGas Partners operates the largest retail
propane distribution business in the U.S.,
serving approximately 968,000 residential,
commercial, industrial, agricultural, and
motor-fuel customers in 45 states. AmeriGas
Partners also sells propane-related supplies
and equipment, including home appliances. The
company owns or leases a fleet of about 385
transport trucks, 680 railroad tank cars, and
2,300 bobtail and rack trucks. It also owns or
leases propane-storage facilities in Arizona
and Rhode Island. AmeriGas Propane, a wholly
owned subsidiary of UGI Corp., owns 58% of
AmeriGas Partners.
[GRAPH APPEARS HERE]
CORNERSTONE PROPANE Cornerstone Propane Partners, L.P. distributes
PARTNERS, L.P. propane for residential, commercial,
industrial, agricultural and other retail uses;
markets and distributes propane and natural gas
liquids; services propane heating systems and
appliances; and sells propane-related supplies,
appliances and other equipment. It is the fifth
largest retail marketer of propane in the U.S.
in terms of volume. The partnership's
operations are concentrated in the east coast,
south-central and west coast regions of the
U.S.
[GRAPH APPEARS HERE]
Page J-4
<PAGE>
PUBLIC COMPANY DESCRIPTIONS
(continued)
FERRELLGAS PARTNERS, L.P. Ferrellgas is the second largest U.S.
distributor of propane serving more than
800,000 residential and commercial customers.
The company also engages in propane/natural
gas trading, wholesale propane marketing, and
chemical feedstock marketing. It markets its
products primarily in the Midwest, the Great
Lakes area, and the Southeast. With a
delivery fleet of approximately 4,000
vehicles, Ferrellgas sells almost 700 million
gallons of fuel annually to its retail
customers, which represents about 8% of all
retail propane bought in the U.S. The company
has acquired more than 100 companies in 11
years.
[GRAPH APPEARS HERE]
HERITAGE PROPANE Heritage Propane Partners distributes propane
PARTNERS, L.P. to more than 220,000 residential, commercial,
industrial, and agricultural customers. The
propane is used primarily for heating,
drying, cooking, as fuel for engines, as a
cutting gas for mining operations, and for
curing tobacco. The company's retail
operations distribute propane to customers in
23 states in the western, southeastern, and
northeastern U.S. The company also
distributes wholesale propane and sells,
installs, and repairs propane-related
equipment. Heritage has acquired 40 retail
propane operations since 1989, bringing
annual propane sales to over 125 million
gallons.
[GRAPH APPEARS HERE]
Page J-5
<PAGE>
PUBLIC COMPANY DESCRIPTIONS
(continued)
NATIONAL PROPANE PARTNERS, L.P. National Propane L.P. markets propane
on a retail basis to residential,
commercial, industrial and agricultural
customers and dealers in 25 states; and
also sells propane-related supplies and
equipment, including home and
commercial appliances. It is the sixth
largest retail marketer of propane in
the U.S. in terms of volume, supplying
approximately 250,000 active retail and
wholesale customers in 25 states
through 166 service centers located in
24 states. Operations are concentrated
in the Midwest, Northeast, Southeast
and Southwest regions of the
U.S.
[GRAPH APPEARS HERE]
SUBURBAN PROPANE PARTNERS, L.P. Suburban Propane Partners markets and
distributes propane to residential,
commercial, industrial and agricultural
customers through a retail distribution
network consisting of 352 district
locations in 41 states. The company,
the third largest retail marketer of
propane in the U.S., serves over
730,000 active customers primarily
located in the east and west coast
regions of the country. Suburban
Propane also sells, installs and
services equipment related to its
propane distribution business,
including heating and cooking
appliances and, at some locations,
propane fuel systems.
[GRAPH APPEARS HERE]
Page J-6
<PAGE>
TRANSACTIONS SUMMARY AND ASSUMPTIONS
(In thousands except per share and per unit data)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SUMMARY CASH FLOW AND COVERAGE ANALYSIS
- ------------------------------------------------------------------------------------------------------------------------------------
($ on per Unit basis)
Estimated Normalized Projected
------------------------------------------------------------
1998 1998 1999 2000 2001 2002
----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
STAR STAND ALONE
EBITDA $ 18,781 $ 22,135 $ 24,491 $ 26,029 $ 27,566 $ 29,104
Interest Expense (7,922) (7,662) (8,811) (9,377) (9,878) (10,380)
Maintenance CapEx (2,710) (2,710) (2,632) (2,679) (2,728) (2,777)
Other (25) (25) (25) (25) (25) (25)
----------- ------------ ----------- ------------ ----------- ------------
Distributable Cash Flow $ 8,124 $ 11,738 $ 13,023 $ 13,948 $ 14,935 $ 15,922
=========== ============ =========== ============ =========== ============
DCF per Common Unit $ 2.11 $ 3.04 $ 3.32 $ 3.42 $ 3.51 $ 3.62
DCF / Common Unit MQD 0.96 x 1.38 x 1.51 x 1.55 x 1.60 x 1.65 x
DCF per Total Unit $ 1.27 $ 1.84 $ 2.02 $ 2.11 $ 2.20 $ 2.30
DCF / Total MQD 0.58 x 0.84 x 0.92 x 0.96 x 1.00 x 1.04 x
Indicated Distribution per Common
Unit $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20
STAR PRO FORMA
EBITDA
------
Star $ 18,781 $ 22,135 $ 24,491 $ 26,029 $ 27,566 $ 29,104
Petro 37,650 46,900 48,706 51,196 53,390 55,385
Synergies 500 500 500 500 500 500
----------- ------------ ----------- ------------ ----------- ------------
Total 56,911 69,535 73,697 77,725 81,456 84,989
----------- ------------ ----------- ------------ ----------- ------------
Interest Expense (28,307) (28,253) (29,468) (31,549) (33,017) (34,202)
Maintenance CapEx (5,486) (5,486) (5,632) (5,739) (5,849) (5,961)
Other (1,025) (1,025) (1,025) (1,025) (1,025) (1,025)
----------- ------------ ----------- ------------ ----------- ------------
Distributable Cash Flow 22,093 34,771 37,572 39,412 41,565 43,801
=========== ============ =========== ============ =========== ============
DCF per Common Unit $ 2.04 $ 3.21 $ 3.47 $ 3.54 $ 3.51 $ 3.45
DCF per Sr. Sub & Common Unit $ 1.62 $ 2.56 $ 2.76 $ 2.78 $ 2.73 $ 2.73
DCF per Total Unit $ 1.53 $ 2.40 $ 2.60 $ 2.62 $ 2.59 $ 2.59
Indicated Distribution per Common $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30
Unit
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
ACCRETION/DILUTION
- ------------------------------------------------------------------------------------------------------------------------------------
DCF per Unit - Star Stand Alone $ 1.27 $ 1.84 $ 2.02 $ 2.11 $ 2.20 $ 2.30
DCF per Unit - Pro Forma $ 1.53 $ 2.40 $ 2.60 $ 2.62 $ 2.59 $ 2.59
- ------------------------------------------------------------------------------------------------------------------------------------
Accretive ($/Unit) $ 0.25 $ 0.56 $ 0.58 $ 0.51 $ 0.39 $ 0.29
Accretive (%) 20.0% 30.7% 28.6% 24.1% 17.5% 12.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma Heating Oil DCF per Unit $ 3.06 $ 3.02 $ 2.87 $ 2.79
DPUs Issued as Sr Sub Units at Beg of
Year - - - 303 303 -
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma Credit Analysis
- ------------------------------------------------------------------------------------------------------------------------------------
EBITDA/Interest 2.01 x 2.46 x 2.50 x 2.46 x 2.47 x 2.48 x
LT Debt/EBITDA 5.43 4.45 4.68 4.73 4.72 4.71
LT Debt/EBITDA (Pro Forma for
Full-Year Acquisitions) 5.27 4.32 4.44 4.50 4.50 4.50
# of Units Issued to Meet Debt
Covenant - - - 574 846 874
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma Coverage Ratios
- ------------------------------------------------------------------------------------------------------------------------------------
MQD Coverage
------------
Common Unit 0.89 x 1.39 x 1.51 x 1.54 x 1.53 x 1.50 x
Senior Subordinated Units 0.71 1.11 1.20 1.21 1.19 1.18
Total Unit 0.66 1.05 1.13 1.14 1.12 1.12
Indicated Distribution Coverage
-------------------------------
Common Unit 0.89 x 1.39 x 1.51 x 1.54 x 1.53 x 1.50 x
Senior Subordinated Unit 0.71 1.11 1.20 1.21 1.19 1.18
Total Unit 0.66 1.05 1.13 1.14 1.12 1.12
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------
CURRENT MODEL ASSUMPTIONS
- -------------------------------------------------------------------------------------------------------------
<S> <C>
Scenario Version 30-yrs, $30mm @ 4.75x mid-year, $.01 '99, $.005 '00-'01, flat att.
Petro Acqs/yr $30,000
Star Acqs/yr $10,000 G.P. Interest Subordinate
Price per Petro Share $ 2.42
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
EQUITY RESTRUCTURING
- -------------------------------------------------------------------------------------------------------------
PETRO
--------------------------------------
PUBLIC INSIDERS
-------- ----------
<S> <C> <C>
Securities Offered Sr Sub Sub & GP
Insentive Rights 76% 24%
Value Offered $ 2.42 $ 2.45
Current Market $ 1.31 $ 1.31
Premium to Market 84.1% 86.7%
Implied Value of Security Offered $18.52 $15.41
Security Offered per Share 0.13064 0.15920
Total Shares 14,609 11,953
Insiders to Receive Sr. Sub 6,572 (6,572)
Shares to Be Converted 21,181 5,382
Units Offered 2,767 857
DPUs Offered 909
Implied Value of GP/Unit $15.41
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------
SOURCES AND USES OF FUNDS
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sources: Uses:
Excess Cash on Hand $841 Repay Debt Principal $206,250
New Sar Debt 120,000 Redeem Preferred 31,767
New MLP Equity 139,363 Premium on Redemption/
New MLP E Equity - Exchange/Defeasance 2,844
Equity for Contest Fees 2,110 Consent Fees 2,110
Cash Balance 0 Transaction Fees 19,343
--------- ---------
$262,314 $262,314
========= =========
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
FINANCING SUMMARY
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AMOUNT RATE UNIT PRICE
--------- ---------- ----------
New Common Raised $139,363 $20.26
New Debt Raised 120,000 9.00%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
UNITS OUTSTANDING
- -------------------------------------------------------------------------------------------------------------
CURRENT PRO FORMA
----------------------------- -----------------------------
UNITS % UNITS %
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Existing Common 3,858 60.5% 3,858 26.7%
New Common 0 0.0% 6,983 48.5%
New Common for Acquisitions 0 0.0% 0 0.0%
Common to Petro Shareholders 0 0.0% 0 0.0%
Sr Sub (Petro S/Hs) 0 0.0% 2,767 19.1%
Existing Sub 2,395 37.5% 567 3.9%
Implied GP 128 2.0% 289 2.0%
------------- ------------- ------------- -------------
Total Units 6,382 100.0% 14,465 100.0%
============= ============= ============= =============
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Main Model Oct-7 Rev I with new Star & AGE 30 yr Petro
Projections and tax effect. For discussion purposes only.
1 of 19
<PAGE>
TRANSACTION SUMMARY AND ASSUMPTIONS
(in thousands except per share and per unit data)
30-yr.; $30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01 flat att.
$10,000 Star Acqs/yr
$30,000 Petro Acqs/yr G.P. Interest Subordinate
$2.42 /Petro Share
OPERATING ASSUMPTIONS
- ---------------------
PETRO STAR STAR NORMAL
----- ---- -----------
Normalized Maintenance CapEx $2,776 $2,710 $2,710
Maintenance CapEx Life 15 yrs 15 yrs
Growth CapEx Life 6.5 yrs 15 yrs
Marginal Tax Rate 33.0% 33.0%
Deferred Tax Percent 0.0%
Required Cash at Beginning for Initial
Distribution 7,956
Minimum Star Stand Alone Cash Balance $500
Minimum Star Pro Forma Cash Balance $10,142
Consolidation Savings $500
Annual Bank Fees $692 $222
Last 20 Days Average Stock Price @ 10/14 $1.31 $20.26
Annual Transaction/Deal Expenses $450
Debt/EBITDA Bank Covenant Ratio 4.5x
Issue Equity to Meet Bank Debt Covenants (Y/N)? yes
DEBT RESTRUCTURING
- ------------------
PROJECTED
12/31/97
PRIVATES: % TENDERED PRINCIPAL STRATEGY PRICE
---------- --------- -------- -----
11.96% Sr Notes 100.0% 60,000 Exchange 105.2%
14.10% Sr Notes 100.0% 3,100 Exchange 105.2%
14.10% Sub Notes 100.0% 3,100 Exchange 105.2%
14.33% Pfd Stock 100.0% 4,167 Neg. Tender 100.0%
PUBLICS:
10.13% Sub Notes & Sr Notes 100.0% 50,000 Neg. Tender 100.0%
9.38% Sub Notes & Sr Notes 100.0% 75,000 Tender 100.0%
12.25% Sub Notes & Sr Notes 100.0% 81,250 Tender 103.5%
12.88% Pfd Stock 100.0% 30,000 Tender 92.0%
NEW SECURITY ASSUMPTIONS
- ------------------------
New MLP Equity
- --------------
Gross Proceeds $139,363
Common Units for Consent Fee 2,110
Common Units to Enron --
--------
Total New Equity Value $141,473
Common Units to Public 6,983 units
New Star Debt
-------------
Gross Proceeds 120,000
Gross Spread % 5.0% Gross Spread % 3.0%
Gross Spread $ $6,968 Gross Spread $ $3,600
Offering Price/Share (current market price) $20.26 Coupon 9.00%
Main Model Oct-7 Rev 1 with new Star & AGE 30 yr Petro Projections and tax
effect
ACQUISITION ASSUMPTIONS
- -----------------------
<TABLE>
<CAPTION>
Petro Multiple 1998 1999 2000 2001 2002
- ----- -------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Amount 4.75x $0 $30,000 $30,000 $30,000 $30,000
Timing End Mid Mid Mid Mid
% EBITDA 0.0% 50.0% 50.0% 50.0% 50.0%
Amount 4.75x $0
Timing Beg
% EBITDA in Initial Yr. 100.0%
Units Issued at: Common $22.00
Sr Sub $18.52
Star Stand-Alone
- ----------------
Weather 30 year
Amount 6.50x $10,000 $10,000 $10,000 $10,000 $10,000
Timing End Mid Mid Mid Mid
% EBITDA in Initial Year 0.0% 50.0% 50.0% 50.0% 50.0%
Amount Financed with Equity $600 $2,948 $4,127 $3,521 $2,853
New Units @: 27 134 188 160 130
Units Issued at Price of: $22.00 $22.00 $22.00 $22.00 $22.00
Amount 6.50x $0
Timing Beg
% EBITDA in Initial Year 100.0%
EXCHANGE ASSUMPTIONS
- --------------------
GETS NEW UNITS OF:
EXISTING --------------------------------------------------
SHAREHOLDERS OF: SHARES COMMON SR SUB JNR SUB G.P. DPUs(1)
- ---------------- ---------- ------ ------ ------- ------ -------
Public Class A Shareholders 14,609 0 1,909 0 0 479
Insider Class B Shares 11 0 0 0 0
Insider Class C Shareholders 0
Class A & C Shares to Receive
Jr Sub & GP 5,382 0 0 567 289 215
Class A Shares to Receive
Sr Sub 6,572 0 859 0 0 215
------- --- ----- --- --- ---
26,574 0 2,767 567 289 909
E Sr. Sub -- --
----- ---
Total 2,767 909
===== ===
</TABLE>
(1) Includes 2.0% G.P. Interest.
TRANSACTION COSTS SUMMARY
- -------------------------
New MLP Equity $6,968
New Star Debt 3,600
Fairness Opinion 1,000
Financial Advisory 1,500
Exchange Fees on Public Petro Debt/Preferred 1,375
Legal Fees 2,500
Printing 1,000
Accounting Fees 250
Other:
- ------
Environmental 350
Rating Agencies 100
Roadshow 200
Asset Appraisal 250
Solicitation expenses 100
Other Bank Fees 150
-------
$19,343
=======
HEATING OIL DPU TRIGGER
- -----------------------
DCF/Unit: % Convert
$2.90 33.3%
CONSENT FEE CALCULATION
- -----------------------
% of Petro Stock 3.0%
New Petro Shares 797
Exchange Ratio 7.65x
------
New Common Units 104
Common Unit Price $20.26
------
Implied Value $2,110
======
Main Model Oct-7 Rev I with new Star & AGE 30 yr Petro
Projections and tax effect. For discussion purposes only.
2 of 19
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
Summary 30-yr; $30mm @ 4.75x mid year; $.01 `99, $.005 `00-`01, flat std.
Distributions $10,000 Star Acqs/yr
$30,000 Petro Acqs/yr G.P. Interest Subordinate
$2.42 / Petro Share
-------------------------------------------------------------------------
Projected
---------------------------------------------------------------
Unitholder Class (1) 1998 1999 2000 2001 2002
------------- --------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Common Unitholders
MQD $24,936 $25,596 $27,229 $29,207
Incentive Distributions - - - -
--------------- -------------- -------------- --------------
Total $24,936 $25,596 $27,229 $29,207
E Capital
Existing Sr. Sub Units - - - -
Number of DPUs Issued as Sr Sub Units - - - -
New Sr. Sub Units - - - -
--------------- -------------- -------------- --------------
Total Sr. Sub Units - - - -
Existing Common - - - -
New Common - - - -
--------------- -------------- -------------- --------------
Total Common - - - -
Common MQD - - - -
Common Incentive Distributions - - - -
Sr. Sub MQD - - - -
Sr. Sub Incentive Distributions - - - -
--------------- -------------- -------------- --------------
Total Distributions
Senior Subordinated Unitholders (1) - 237 237 -
Number of DPUs Issued on Sr. Sub Units
Base MQD $ 6,364 $ 6,378 $ 6,392 $ 6,392
Incremental MQD from DPUs Issued as
Sr. Sub Units - 545 1,089 1,089
Incentive Distributions - - - -
Incremental Incentive Distributions
from DPUs Issued as Sr. Sub Units - - - -
--------------- -------------- -------------- --------------
Total $ 6,364 $ 6,923 $ 7,481 $ 7,481
Subordinated Unitholders (1)
Number of DPUs Issued as Sr. Sub Units - 60 60 -
Base MQD $1,305 $ 1,305 $ 1,305 $ 1,305
Incremental MQD from DPUs Issued as
Sr. Sub Units - 138 277 277
Incentive Distributions - - - -
Incremental Incentive Distributions
from DPUs Issued as Sr. Sub Units - - - -
--------------- -------------- -------------- --------------
Total $1,305 $ 1,443 $ 1,582 $ 1,582
General Partner
Number of DPUs Issued on Sr. Sub Units - - - -
Base MQD $665 $651 $638 $638
Incremental MQD from DPUs Issued as
Sr. Sub Units - 14 28 28
Incentive Distributions - - - -
Incremental Incentive Distributions
from DPUs Issued as Sr. Sub Units - - - -
--------------- -------------- -------------- --------------
Total $665 $665 $665 $665
Unitholder Class Total
Common Unitholders $24,936 $25,596 $27,279 $29,207
Senior Subordinated Unitholders $ 6,364 $ 6,923 $ 7,481 $ 7,481
Subordinated Unitholders 1,305 1,443 1,582 1,582
General Partner 665 665 665 665
--------------- -------------- -------------- --------------
Total $33,270 $34,628 $36,957 $38,935
Distributions to DPUs converted to
Senior Subordinated Units
MQD $ 0 $ 697 $ 1,394 $ 1,394
Incentive Distributions - - - -
--------------- -------------- -------------- --------------
Total - 697 1,394 1,394
check - - - -
</TABLE>
- ------------
(1) Reflects distributions for respective Unitholder class. All DPUs are issued
as Senior Subordinated Units but are distributed pro rata to all Petro
shareholders. Consequently, the Subordinated Unitholder class includes DPUs
which have been issued as Senior Subordinated Units.
Main Model Oct-7 Rev I with new Star & AGE 30 yr Petro
Projections and tax effect. For discussion purposes only.
3 of 19
<PAGE>
<TABLE>
<CAPTION>
TRANSACTION SUMMARY AND ASSUMPTIONS
(in thousands except per share and per unit data) 30-yr; $30mm @ 4.75x mid-year;$.01 '99,$.005 '00-'O1, flat att.
RECAPITALIZATION ASSUMPTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
(D)EFEASE
(T)ENDER
(R)EDEEM PRINCIPAL
LOCKUP (E)XCHANGE AS OF MATURITY PERIOD COUPON/ SINKING FUND PAYMENT % RED/
--------------- --------------------
PETRO INSTRUMENTS: PREMIUM (N)OTHING 9/30/98 M/D YR DIVIDEND PAYMENT YEAR START EXCHANGED
- ------------------ ------- ---------- ---------- --------------- -------- -------------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11.96% Sr Notes e $ 60,000 v 1-Oct 0 11.960% $ 0 0 100.0%
14.10% Sr Notes e 3,100 v 15-Jan 2001 14.100% - 1997 100.0%
14.10% Sub Notes e 3,100 v 15-Jan 2001 14.100% - 1997 100.0%
10.13% Sub Notes & Sr Notes 0.0% t 50,000 v 1-Apr 2003 10.130% - 100.0%
9.38% Sub Notes & Sr Notes 0.0% t 75,000 v 1-Feb 2006 9.375% - 100.0%
12.25% Sub Notes & Sr Notes 0.0% t 81,250 v 1-Feb 2005 12.250% - 100.0%
8.00% Acq. & Other Notes Pay n 14,508 v 0 8.000% - 0 0.0%
8.25% Existing Credit Facility n 0 v 1998 8.250% - 0.0%
0.00% Other Notes n 0 v NA NA 0.000% 0 NA 0.0%
--------
$286,958
PFRD STOCK:
- -----------
14.33% Pfd Stock t 4,167 v 1-Aug 1999 14.330% 4,167 1997 100.0%
12.88% Pfd Stock 0.0% t 30,000 v 15-Feb 2009 12.875% 0 100.0%
0.00% n 0 0.000%
--------
$ 34,167
--------
Total Petro $321,125
--------
STAR INSTRUMENTS:
- ------------------
8.04% 1st Mortgage Notes 0.07 n 85,000 v NA NA 8.040% - 0 0.0%
7.25% WC Revolver 0.00 n 4,785 NA NA 7.250% - NA 0.0%
7.25% Acquisition Facility 0.01 n 9,000 v NA NA 7.250% - NA 0.0%
9.00% New Debt n 120,000 v NA NA 9.000% 0 NA 0.0%
7.17% Pearl Notes 0.01 n 11,000 NA NA 7.170% 0 NA 0.0%
--------
8.21% $218,785
--------
Total Combined $539,910
========
<CAPTION>
RED/EXCHG DEFEASANCE RED/EXCHG/DEFEASE EXCHANGED
-------------------------
PETRO INSTRUMENTS: PRICE PRICE VALUE PREMIUM INT RATE SECURITY TYPE
- ------------------ --------- ---------- ----------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
11.96% Sr Notes 105.2% $63,126 $ 0 9.0% Sr Notes
14.10% Sr Notes 105.2% 3,260 - 11.5% Sr Notes
14.10% Sub Notes 105.2% 3,260 - 11.5% Sub Notes
10.13% Sub Notes & Sr Notes 100.0% 106.2% 50,000 - Sub Notes & Sr Notes
9.38% Sub Notes & Sr Notes 100.0% 108.2% 75,000 - Sub Notes & Sr Notes
12.25% Sub Notes & Sr Notes 103.5% 116.2% 84,094 2,844 Sub Notes & Sr Notes
8.00% Acq. & Other Notes Pay 100.0% - - Acq. & Other Notes
Pay
8.25% Existing Credit Facility 100.0% - - Existing Credit
Facility
0.00% Other Notes 0.0% - - 11.0% Other Notes
----------
$ 2,844
PFRD STOCK:
- -----------
14.33% Pfd Stock 100.0% 4,167 - Pfd Stock
12.88% Pfd Stock 92.0% 27,600 - Pfd Stock
0.00% - -
----------
$ 0
Total Petro ----------
$ 2,844
----------
STAR INSTRUMENTS:
- ------------------
8.04% 1st Mortgage Notes 0.0% - - 1st Mortgage Notes
7.25% WC Revolver 0.0% - - WC Revolver
7.25% Acquisition Facility 0.0% - - Acquisition
Facility
9.00% New Debt 0.0% - - New Notes
7.17% Pearl Notes 0.0% - - Pearl Notes
----------
$ 0
----------
Total Combined $ 2,844
----------
2,843.75
</TABLE>
STAR STAND ALONE DISTRIBUTION ASSUMPTIONS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Distribution
------------
<S> <C>
Minimum Quarterly Distribution $ 2.20
First Target Distribution $ 2.42
Second Target Distribution $ 2.84
Third Target Distribution $ 3.70
Thereafter NM
Target Distribution Level $ 2.20
Annual Distribution Increase $ 0.00
------------
Standard Distributions Structure ("S") or Target ("T") t
------------
</TABLE>
<TABLE>
<CAPTION>
STAR PRO FORMA DISTRIBUTION ASSUMPTIONS
- -------------------------------------------------------------
Distribution
------------
<S> <C>
Minimum Quarterly Distribution $ 2.30
First Target Distribution $ 2.42
Second Target Distribution $ 2.84
Third Target Distribution $ 3.70
Thereafter NM
<CAPTION>
----------------------------------------------------
1998 1999 2000 2001 2002 Thereafter
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Annual Indicated Distribution Increase $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Target Indicated Distribution Level $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30
-----------
Standard Distribution Structure ("S") or Target ("T") t
-----------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Main Model Oct-7 Rev I with new Star & AGE 30 yr Petro
Projections and tax effect. For discussion purposes only.
4 of 19
<PAGE>
- --------------------------------------------------------------------------------
Pro Forma Opening Balance Sheet
(In thousands except per share and per unit data)
<TABLE>
<CAPTION>
Opening Balance Sheet Star Gas Petro Pro Forma
-------- -----
---------- ---------- Merger Star Gas
9/30/98 9/30/98 Adjustments 9/30/98
---------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Assets
Cash $ 500 $ 9,642 $ 0 $ 10,142
Other Current Assets 15,376 71,498 - 86,874
-------- --------- -------- --------
Total Current Assets 15,876 81,140 - 97,016
PP&E and Intangibles, Net 161,292 106,695 - 267,987
Investments in Unconsolidated Affiliates - 1,582 (1,582) -
Other Assets - 12,802 - 12,802
-------- --------- -------- --------
Total Assets 177,168 202,219 (1,582) 377,805
======== ========= ========
Liabilities
Current Liabilities 10,101 80,870 - 90,971
8.25% Existing Credit Facility 4,785 - - 4,785
Long Term Debt 105,000 286,958 (82,804) 309,154
Total Preferred Stock - 34,167 (34,167) -
Other Liabilities 76 10,710 - 10,786
-------- --------- -------- --------
Total Liabilities 119,962 412,705 (116,971) 415,696
Common Shareholder's/Partner's Equity 57,206 (210,486) 115,389 (37,891)
-------- --------- -------- --------
Total Liabilities and Equity Check $177,168 $202,219 ($ 1,582) $377,805
======== ========= ========
0 -
<CAPTION>
PRO FORMA CAPITAL STRUCTURE Star Gas Petro
-------- -----
---------- ---------- % Not Merger Star Gas
9/30/98 9/30/98 Tendered Adjustments 9/30/98
---------- ---------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
DEBT:
8.04% 1st Mortgage Notes $ 85,000 $0 $ 0 $85,000
7.25% WC Revolver 4,785 - - 4,785
7.25% Acquisition Facility 9,000 - - 9,000
7.17% Pearl Notes 11,000 - - 11,000
11.96% Sr Notes - 60,000 100.0% (60,000) -
14.10% Sr Notes - 3,100 100.0% (3,100) -
14.10% Sub Notes - 3,100 100.0% (3,100) -
10.13% Sub Notes & Sr Notes - 50,000 100.0% (50,000) -
9.38% Sub Notes & Sr Notes - 75,000 100.0% (75,000) -
12.25% Sub Notes & Sr Notes - 81,250 100.0% (81,250) -
0.00% Other Notes - 0 - -
8.00% Acq. & Other Notes Pay - 14,508 - 14,508
8.25% Existing Credit Facility - 0 - -
9.00% Exchange Debt - - 63,126 65,126
11.50% Exchanged Debt 6,520 6,520
9.00% New Debt - - 120,000 120,000
-------- --------- -------- --------
Total L.T. Debt 109,785 286,958 (82,804) 313,939
-------- --------- --------
Preferred Stock
14.33% Pfd. Stock - 4,167 - (4,167) -
12.88% Pfd. Stock - 30,000 (30,000) -
-------- --------- -------- --------
Total Preferred - 34,167 (34,167) -
-------- --------- --------
Common Equity 57,206 (210,486) 115,389 (37,891)
-------- --------- --------
Total Capital $166,991 $ 110,639 $276,048
======== ========= ========
</TABLE>
Main Model Oct-7 Rev I with new Star & AGE 30 yr Petro
Projections and tax effect. For discussion purposes only.
5 of 19
<PAGE>
STAR GAS STAND ALONE INCOME STATEMENT
(In thousands except per share and per unit data)
<TABLE>
<CAPTION>
Estimated Normalized Projected
---------------------------------------
1998 1998 1999 2000 2001 2002
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
EBITDA $18,781 $22,133 $24,491 $26,029 $27,566 $29,104
Depreciation and Amortization 11,927 11,649 12,358 13,346 14,224 14,938
------- ------- ------- ------- ------- -------
EBIT 6,854 10,486 12,133 12,683 13,342 14,166
Interest Expense (7,922) (7,662) (8,811) (9,377) (9,878) (10,380)
Interest Income - - - - - -
Other Income - - - - - -
------- ------- ------- ------- ------- -------
Income Before Taxes (1,068) 2,824 3,322 3,306 3,464 3,786
Current Income Taxes (25) (25) (25) (25) (25) (25)
Deferred Income Taxes - - - - - -
------- ------- ------- ------- ------- -------
Net income Available to Common ($1,093) $ 2,799 $ 3,297 $ 3,281 $ 3,439 $ 3,761
======= ======= ======= ======= ======= =======
STAR GAS STAND ALONE UNITS OUTSTANDING
Common Units
Beginning Balance 3,832 3,832 3,858 3,990 4,174 4,330
Issuance 27 27 131 184 157 127
Buyback 0 0 0 0 0 0
------- ------- ------- ------- ------- -------
Ending Balance 3,858 3,858 3,990 4,174 4,330 4,458
------- ------- ------- ------- ------- -------
Average Common Units Outstanding 3,858 3,858 3,924 4,082 4,252 4,394
Subordinated Units
Beginning Balance 2,396 2,396 2,396 2,396 2,396 2,396
Issuance 0 0 0 0 0 0
Buyback 0 0 0 0 0 0
------- ------- ------- ------- ------- -------
Ending Balance 2,396 2,396 2,396 2,396 2,396 2,396
------- ------- ------- ------- ------- -------
Average Subordinated Units Outstanding 2,396 2,396 2,396 2,396 2,396 2,396
GP Implied Units
Beginning Balance 127 127 128 130 134 137
Issuance 1 1 3 4 3 3
Buyback 0 0 0 0 0 0
------- ------- ------- ------- ------- -------
Ending Balance 128 128 130 134 137 140
------- ------- ------- ------- ------- -------
Average Implied GP Units Outstanding 128 128 129 132 136 139
Total Units 6,382 6,382 6,516 6,704 6,864 6,993
======= ======= ======= ======= ======= =======
Average Units Outstanding 6,382 6,382 6,449 6,610 6,784 6,929
======= ======= ======= ======= ======= =======
</TABLE>
Main Model Oct-7 Rev I with new Star & AGE 30 yr Petro
Projections and tax effect. For discussion purposes only.
6 of 19
<PAGE>
<TABLE>
<CAPTION>
(In thousands except per share and per unit data)
Estimated Projected
-------------------------------------------
Star Gas Stand Alone Balance Sheet 1998 1999 2000 2001 2002
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Assets:
Cash $ 500 $ 500 $ 500 $ 500 $ 500
Other Current Assets 15,376 18,447 19,274 20,101 20,928
-------- -------- -------- -------- --------
Total Current Assets 15,876 18,947 19,774 20,601 21,428
PP&E and Intangibles, Net 161,292 162,016 161,799 160,753 159,042
Other Assets - - - - -
-------- -------- -------- -------- --------
Total Assets 177,168 180,963 181,573 181,354 180,470
======== ======== ======== ======== ========
Liabilities:
Current Liabilities - Excluding Working Capital Borrowing 10,101 13,172 13,999 14,826 15,653
Total Debt 109,785 118,453 125,370 132,288 139,207
Other Liabilities 76 76 76 76 76
-------- -------- -------- -------- --------
Total Liabilities 119,962 131,701 139,445 147,190 154,936
Partner's Equity 57,206 49,262 42,128 34,164 25,534
======== -------- -------- -------- --------
Total Liabilities and Equity $177,168 $180,963 $181,573 $181,354 $180,470
======== ======== ======== ======== ========
Check 0 0 0 0 0
Star Gas Stand Alone Cash Flow Statement
Net Income $ 3,297 $ 3,281 $ 3,439 $ 3,761
Depreciation and Amortization 12,358 13,346 14,224 14,938
Deferred Taxes - - - -
Other Income - - - -
Other Assets/Liabilities - - - -
Change in Working Capital 0 - (0) 0
-------- -------- -------- --------
Cash from Operations 15,655 16,627 17,663 18,699
-------- -------- -------- --------
Maintenance CapEx (2,632) (2,679) (2,728) (2,777)
Internal Growth CapEx - - - -
External Growth CapEx (10,000) (10,000) (10,000) (10,000)
-------- -------- -------- --------
Cash from Investments (12,632) (12,679) (12,728) (12,777)
-------- -------- -------- --------
Acquisition Borrowing 7,052 5,873 6,479 7,147
Remaining Distributions to Repay Debt (0) (0) (11) (678)
Amortization of Mortgage Notes - - - -
Borrowing to Repay Exisitng Debt - - - -
Borrowing for Changes in WC (0) - 0 (0)
Borrowing to Pay Full MQD 1,166 594 - -
Change in Equity 2,949 4,127 3,521 2,853
Transaction/Deal Expenses (450) (450) (450) (450)
Distributions (14,188) (14,542) (14,924) (15,243)
-------- -------- -------- --------
Cash from Financing (3,473) (4,398) (5,385) (6,372)
-------- -------- -------- --------
Net Cash Flow (450) (450) (450) (450)
Initial Cash Balance 500 500 500 500
-------- -------- -------- --------
Cash Available for Paydown on WC Revolver and Acq. Facility 50 50 50 50
Minimum Cash Balance 500 500 500 500
Borrowing/(Paydown) on WC Revolver and Acq. Facility 450 450 450 450
-------- -------- -------- --------
Net Change in Cash - - - -
-------- -------- -------- --------
Ending Cash Balance $ 500 $ 500 $ 500 $ 500
======== ======== ======== ========
</TABLE>
Main Model Oct-7 Rev I with new Star & AGE 30 yr Petro
Projections and tax effect. For discussion purposes only.
7 of 19
<PAGE>
<TABLE>
<CAPTION>
(In thousands except per share and per unit data)
Estimated Normalized Projected
----------------------------------
1998 1998 1999 2000 2001 2002
--------- ---------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
STAR GAS STAND ALONE EBITDA CALCULATION
(See Tab 3: Cases)
- -------------------------------------------------------------------------------------------------------------------------------
Year 1 Year 2 Year 3 Year 4 Year 5
EBITDA Growth Rate 17.9% 10.6% 6.3% 5.9% 5.6%
- -------------------------------------------------------------------------------------------------------------------------------
Base EBITDA: Timing
------
End 1998
Mid 1999
Mid 2000
Mid 2001
Mid 2002
Mid 2003
Mid 2004
Mid 2005
------- ------- ------- ------- ------- -------
Total EBITDA $18,781 $22,135 $24,491 $26,029 $27,566 $29,104
======= ======= ======= ======= ======= =======
Pro Forma Full-Year EBITDA for Debt Covenant Analysis 18,781 22,135 25,260 26,798 28,335 29,873
STAR GAS STAND ALONE DEPRECIATION CALCULATION
Existing Depreciation $11,927 $11,649 $11,649 $11,649 $11,649 $11,649
1998 Normal 2,710
Maintenance CapEx: 1998 2,710 $ 0 $ 0 $ 181 $ 181 $ 181 $ 181
Annual Growth 1.8% 1999 2,632 88 175 175 175
2000 2,679 89 179 179
2001 2,728 91 182
2002 2,777 93
Internal Growth CapEx 1998 0 - - - - - -
Annual Growth: 0.0% 1999 0 - - - -
2000 0 - 0 0
2001 0 - 0
2002 0 -
2003 0
2004 0
2005 0
External Growth CapEx: 1998 10,000 - - 667 667 667 667
Annual Growth: 0.00/6 1999 10,000 333 667 667 667
2000 10,000 333 667 667
2001 10,000 333 667
2002 10,000 333
2003 10,000
2004 10,000
2005 10,000
------- ------- ------- ------- ------- -------
Total Depreciation: $11,927 $11,649 $12,358 $13,346 $14,224 $14,938
======= ======= ======= ======= ======= =======
</TABLE>
Main Model Oct-7 Rev I with new Star & AGE 30 yr Petro
Projections and tax effect. For discussion purposes only.
8 of 19
<PAGE>
<TABLE>
<CAPTION>
Star Gas Stand Alone Schedule
(In thousands except per share and per unit share)
Estimated Normalized Projected
----------------------------------------------------
1998 1998 1999 2000 2001 2002
---------- ------------ ------------ --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
8.04% 1st Mortgage Notes
Beginning Balance $ 85,000 $85,000 $ 85,000 $ 85,000 $85,000 $ 85,000
Borrowing 0 0 0 0 0 0
Amortization 0 0 0 0 0 0
---------- ------------ ------------ --------- -------- ---------
Ending Balance 85,000 85,000 85,000 85,000 85,000 85,000
Interest Payment 8.04% 6,834 6,834 6,834 6,834 6,834 6,834
Make-Whole Payment 0 0 0 0 0 0
7.17% Pearl Notes
Beginning Balance $ 0 $ 0 $ 11,000 S11,000 $11,000 S11,000
Borrowing 11,000 11,000 0 0 0 0
Amortization 0 0 0 0 0 0
---------- ------------ ------------ --------- -------- ---------
Ending Balance 11,000 11,000 11,000 11,000 11,000 11,000
Interest Payment 7.17% 613 613 789 789 789 789
% of year Pearl Notes
Outstanding 77.7% 77.7% 0 0 0 0
7.25% WC Revolver
Beginning Balance - - $ 4,785 $ 4,785 $ 4,785 $ 4,785
Borrowing for Change in WC - - (0) 0 (0)
Borrowing/(Payment) 4,785 4,785 0 0 0 0
---------- ------------ ------------ --------- -------- ---------
Ending Balance 4,785 4,785 4,785 4,785 4,785 4,795
Effective Avg WC Balance 3,490 (97) 0 14 0 14
Interest Payment 7.25% 253 (7) 0 1 0 1
7.25% Acquisition Facility
Beginning Balance - $ 9,000 $ 17,668 $24,585 $ 31,503
External Acquisitions 9,400 9,400 7,052 5,873 6,479 7,147
External Acquisitions at
Beginning of 1999 - - - - - -
Internal Acquisitions (400) (400) - - - -
Borrowing to Pay Full MQD - - 1,166 594 - -
Borrowings to Repay - - - - - -
Existing Debt - - - - - -
Borrowings/(Payment) - - 450 450 450 450
Remaining Distributions
to Repay Debt - - (0) (0) (11) (678)
---------- ------------ ------------ --------- -------- ---------
Ending Balance 9,000 9,000 17,668 24,585 31,503 38,422
Interest Payment 7.25% 0 0 967 1,532 2,033 2,535
Total Debt
Beginning Balance $ 85,000 $85,000 $109,785 $118,453 $125,370 $132,288
Amortization of Mortgage Notes - - - - - -
Borrowing for Pearl Notes 11,000 11,000 - - - -
Borrowing for Changes in WC - - (0) - 0 (0)
Borrowing to Pay Full MQD - - 1,166 594 - -
Acquisition Borrowing 9,000 9,000 7,052 5,873 6,479 7,147
Borrowing to Repay
Existing Debt - - - - - -
Remaining Distributions
to Repay Debt - - (0) (0) (11) (678)
Borrowing/(Payment) on WC Revolver
and Acq. Facility 4,785 4,785 450 450 450 450
---------- ------------ ------------ --------- -------- ---------
Ending Balance $109,785 $109,785 $118,453 $125,370 $132,288 $139,207
========== ============ ============ ========= ======== =========
Interest Expense
Interest Expense $ 7,700 $ 7,440 $ 8,589 $ 9,155 $ 9,656 $ 10,158
Bank Fee 222 222 222 222 222 222
---------- ------------ ------------ --------- -------- ---------
Total Interest Payment $ 7,922 $ 7,662 $ 8,811 $ 9,377 $ 9,878 $ 10,380
========== ============ ============ ========= ======== =========
</TABLE>
Main Model Oct-7 Rev I with new Star & AGE 30 yr Petro
Projections and tax effect. For discussion purposes only.
9 of 19
<PAGE>
<TABLE>
<CAPTION>
Star Gas Stand Alone Schedule of Actual Distributions
(In thousands except per share and per unit data)
Estimated Normalized Projected
------------------------------------------------
ASSUMES REVISED TARGET
DISTRIBUTION STRUCTURE 1998 1998 1999 2000 2001 2002
--------- -------- ---------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Distributable Cash
- ------------------
Cash from Operations $10,834 $14,448 $15,655 $16,627 $17,663 $18,699
Maintenance CapEx (2,710) (2,710) (2,632) (2,679) (2,728) (2,777)
Other 0 0 0 0 0 0
--------- -------- ---------- --------- -------- --------
Total MLP Distributable Cash
Flow 8,124 11,738 13,023 13,948 14,935 15,922
Distributable Cash Flow / Unit $ 1.27 $ 1.84 $ 2.02 $ 2.11 $ 2.20 $ 2.30
Average Units for Calculating Annual
- ------------------------------------
Distributions 2 2 2 2
-------------
Common Units 3,858 3,858 3,924 4,082 4,252 4,394
Subordinated Units 2,396 2,396 2,396 2,396 2,396 2,396
General Partner Interest Unit
Equivalent 128 128 129 132 136 139
--------- -------- ---------- --------- -------- --------
Total Units Outstanding 6,382 6,382 6,449 6,610 6,784 6,929
Distribution Levels
- -------------------
MQD $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20
First Target $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42
Second Target $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84
Third Target $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70
Indicated Cash Distribution $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20
Distribution of MQD
- -------------------
Cash Available 8,124 11,738 13,023 13,948 14,935 15,922
Cash Borrowed to Pay Full MQD, 5,917 2,303 1,166 594 0 0
Allocation to:
Common Units 8,489 8,489 8,633 8,980 9,354 9,667
Subordinated Units 5,271 5,271 5,271 5,271 5,271 5,271
General Partner Interest 281 281 284 291 298 305
First Target Distribution
- -------------------------
Cash Available 0 0 0 0 11 678
Cash Required for Target
Distribution 0 0 0 0 1,492 1,524
Cash Required for Indicated
Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Second Target Distribution
- --------------------------
Cash Available 0 0 0 0 0 0
Cash Required for Target
Distribution 0 0 0 0 0 0
Cash Required for Indicated
Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Incentive Distribution 0 0 0 0 0 0
Third Target Distribution
- -------------------------
Cash Available 0 0 0 0 0 0
Cash Required for Target
Distribution 0 0 0 0 0 0
Cash Required for Indicated
Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Incentive Distribution 0 0 0 0 0 0
</TABLE>
Main Model Oct-7 Rev I with new Star & AGE 30 yr Petro
Projections and tax effect. For discussion purposes only.
10 of 19
<PAGE>
Star Gas Stand Alone Schedule of Actual Distributions (cont'd)
(In thousands except per share and per unit data)
<TABLE>
<CAPTION>
Estimated Normalized Projected
----------------------------------------------------
1998 1998 1999 2000 2001 2002
----------- ----------- ------------ --------- ---------- --------
Remaining Distributions
- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Cash Available 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Incentive Distribution 0 0 0 0 0 0
Repay Indebtedness (0) (0) 0 0 11 678
Total Distributions
- -------------------
Common Units 8,489 8,489 8,633 8,980 9,354 9,667
Subordinated Units 5,271 5,271 5,271 5,271 5,271 5,271
General Partner Interest 281 281 284 291 298 305
Incentive Distribution 0 0 0 0 0 0
------- ------- ------- ------- ------- -------
Total Distributions $14,041 $14,041 $14,188 $14,542 $14,924 $15,243
======= ======= ======= ======= ======= =======
Total Distributions Per Unit
- ----------------------------
Common Unit $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20
Subordinated Unit 2.20 2.20 2.20 2.20 2.20 2.20
GP Unit 2.20 2.20 2.20 2.20 2.20 2.20
</TABLE>
Main Model Oct-7 Rev I with new Star & AGE 30 yr Petro
Projections and tax effect. For discussion purposes only.
11 of 19
<PAGE>
(In thousands except per share and per unit data)
<TABLE>
<CAPTION>
Petro EBITDA Calculation Estimated Normalized Projected
----------------------------------------------------
1998 1998 1999 2000 2001 2002
----------- ----------- ------------ --------- ---------- --------
- ------------------------------------------------------------------------------------------------------------------------------------
Year 1 Year 2 Year 3 Year 4 Year 5
EBITDA Growth Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Base EBITDA: Timing
------
Acquisitions: End 1998 $ 0
Mid 1999 30,000
Mid 2000 30,000
Mid 2001 30,000
Mid 2002 30,000
Mid 2003 30,000
Mid 2004 30,000
Mid 2005 30,000
------- ------- ------- ------- ------- -------
Total EBITDA. $37,630 $46,900 $48,706 $51,196 $53,390 $55,385
======= ======= ======= ======= ======= =======
Pro Forma Full-Year EBITDA for Debt Covenent
Analysis 37,630 46,900 51,864 54,354 56,548 58,543
Petro Depreciation Calculation
Existing Depreciation $28,710 $28,710 $28,710 $28,710 $28,710 $28,710
Maintenance CapEx: 1998 $ 2,776 - - 185 185 185 185
Annual Growth: 2.0% 1999 3,000 100 200 200 200
2000 3,060 102 204 204
2001 3,121 104 208
2002 3,184 106
2003 3,247
2004 3,312
2005 3,378
Internal Growth CapEx: 1998 $ 0 - - - - - -
Annual Growth: 0.0% 1999 0 - - - -
2000 0 - - -
2001 0 - -
2002 0 -
2003 0
2004 0
2005 0
External Growth CapEx: 1998 $ 0 - - 0 0 0 0
Annual Growth: 0.0% 1999 30,000 2,308 4,615 4,615 4,615
2000 30,000 2,308 4,615 4,615
2001 30,000 2,308 4,615
2002 30,000 2,308
2003 30,000
2004 30,000
2005 30,000
------- ------- ------- ------- ------- -------
Total Depreciation: 28,710 28,710 31,303 36,120 40,942 45,767
======= ======= ======= ======= ======= =======
</TABLE>
Main Model Oct-7 Rev I with new Star & AGE 30 yr Petro
Projections and tax effect. For discussion purposes only.
12 of 19
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands except per share and per unit data)
STAR PRO FORMA INCOME STATEMENT PROJECTED
ESTIMATED NORMALIZED -----------------------------------------
1998 1998 1999 2000 2001 2002
-------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Combined EBITDA $ 56,411 $ 69,035 $ 73,197 $ 77,225 $ 80,956 $ 84,489
Consolidated Savings 500 500 500 500 500 500
-------- ---------- -------- -------- -------- --------
Pro Forma EBITDA 56,911 69,535 73,697 77,725 81,456 84,989
Depreciation and Amortization 40,637 40,359 43,661 49,466 55,166 60,705
-------- ---------- -------- -------- -------- --------
EBIT 16,274 29,176 30,036 28,259 26,290 24,284
Interest Expense (28,307) (28,253) (29,468) (31,549) (33,017) (34,202)
Interest Income - - - - - -
Other Income - - - - - -
EBT (12,033) 923 569 (3,290) (6,726) (9,919)
-------- ---------- -------- -------- -------- --------
Current Income Taxes (1,025) (1,025) (1,025) (1,025) (1,025) (1,025)
Deferred Income Taxes - - - - - -
-------- ---------- -------- -------- -------- --------
Net Income Available to Common $(13,058) $ (102) $ (456) $ (4,315) $ (7,751) $(10,944)
======== ========== ======== ======== ======== ========
Pro Forma Full-Year EBITDA for Debt Covenant Analysis 56,911 69,535 77,624 81,652 85,383 88,916
STAR PRO FORMA UNITS OUTSTANDING
Common Units
Beginning Balance 10,842 10,842 10,842 11,416 12,261
Issuance - - - - -
Issued to Meet Debt Covenant Ratio - - 574 846 874
Issued to E - - - - -
Buyback - - - - -
-------- ---------- -------- -------- -------- --------
Ending Balance 10,842 10,842 10,842 11,416 12,261 13,136
-------- ---------- -------- -------- -------- --------
Average Common Units Outstanding 10,842 10,842 10,842 11,129 11,839 12,699
Deferred Participation Units -
Beginning Balance - - 909 909 606 303
DPUs Issued at Beginning of Year - - - (303) (303) -
-------- ---------- -------- -------- -------- --------
Ending Balance - - 909 606 303 303
SR Subordinated Units
Beginning Balance - Sr Sub Units 2,767 2,767 2,767 3,070 3,373
DPUs Issued - - 303 303 -
Sr. Sub Issuance - - - - -
Sr. Sub to E - - - - -
Sr. Sub Converted to G.P. Interest - - - - -
-------- ---------- -------- -------- -------- --------
Ending Balance 2,767 2,767 2,767 3,070 3,373 3,373
-------- ---------- -------- -------- -------- --------
Average Sr Subordinated Units Outstanding 2,767 2,767 2,767 3,070 3,373 3,373
Subordinated Units
Beginning Balance 567 567 567 567 567
Issuance - - - - -
Buyback - - - - -
-------- ---------- -------- -------- -------- --------
Ending Balance 567 567 567 567 567 567
-------- ---------- -------- -------- -------- --------
Average Subordinated Units Outstanding 567 567 567 567 567 567
GP Implied Units
Beginning Balance 289 289 289 289 289
Issued in conjunction with DPUs - - - - -
Issued to Meet Debt Covenant Ratio - - - - -
Issued in conjunction with E Equity - - - - -
Buyback - - - - -
-------- ---------- -------- -------- -------- --------
289 289 289 289 289 289
-------- ---------- -------- -------- -------- --------
Average Implied GP Units Outstanding 289 289 289 289 289 289
Total Units Outstanding 14,465 14,465 14,465 15,343 16,491 17,366
-------- ---------- -------- -------- -------- --------
Average Total Units Outstanding 14,465 14,465 14,465 15,055 16,068 16,928
======== ========== ======== ======== ======== ========
Pro Forma Heating Oil Units Used for DPU Issue Calculation 8,016 8,446 9,285 10,000
</TABLE>
<PAGE>
(In thousands except per share and per unit data}
<TABLE>
<CAPTION>
STAR PRO FORMA BALANCE SHEET Estimated Projected
--------------------------------------------------
1998 1999 2000 2001 2002
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash $ 10,142 $ 10,142 $ 10,142 $ 10,142 $ 10,142
Other Current Assets 86,874 92,319 97,589 102,470 107,092
--------- --------- --------- --------- ---------
Total Current Assets 97,016 102,461 107,731 112,612 117,354
PP&E and Intangibles, Net 267,987 269,958 266,231 256,915 242,170
Other Assets 12,802 12,802 12,802 12,802 12,802
--------- --------- --------- --------- ---------
Total Assets 377,805 385,221 386,764 382,329 372,206
========= ========= ========= ========= =========
LIABILITIES
Current Liabilities 90,978 96,416 101,686 106,567 111,189
8.25% Existing Credit Facility 4,785 4,785 4,785 4,785 4,785
Total LT Debt 309,154 344,852 367,434 384,224 400,122
Other Liabilities 10,786 10,786 10,786 10,786 10,786
--------- --------- --------- --------- ---------
Total Liabilities 415,696 456,839 484,691 506,361 $ 526,882
PREFERRED STOCK - - - - -
Common Shareholder's Equity (37,891) (71,618) (97,927) (124,033) (154,676)
--------- --------- --------- --------- ---------
Total Liabilities and Equity $ 377,805 $ 385,221 $ 386,764 $ 382,329 $ 372,206
========= ========= ========= ========= =========
Check - - 0 (0) (0)
STAR PRO FORMA CASH FLOW STATEMENT
Net Income ($456) ($4,315) ($7,751) (10,944)
Depreciation and Amortization 43,661 49,466 55,366 60,705
Deferred Taxes - - - -
Other Assets/Liab - - - -
--------- --------- --------- ---------
Change in Non-Cash Working Capital - - - -
Cash from Operations 43,204 45,151 47,414 49,762
Maintenance CapEx (5,632) (5,739) (5,849) (5,961)
Internal Growth CapEx - - - -
External Growth CapEx (40,000) (40,000) (40,000) (40,000)
--------- --------- --------- ---------
Cash from Investments (45,632) (45,739) (45,849) (45,961)
Acquisition Borrowing 40,000 40,000 40,000 40,000
Remaining Distributions to Repay Debt (4,302) (4,785) (4,608) (4,866)
Amortization of Existing Debt (6,127) (8,141) (60) (60)
Borrowing to Repay Existing Debt 6,127 8,141 60 60
Borrowing for Changes in WC - - - -
Change in Common Equity & GP Interest - 12,634 18,603 19,236
Repayment of Preferred Stock - - - -
Distributions (33,270) (34,628) (36,957) (38,935)
--------- --------- --------- ---------
Cash from Financing 2,428 13,221 17,038 15,435
Net Cash Flow 0 12,634 18,603 19,236
Initial Cash Balance 10,142 10,142 10,142 10,142
--------- --------- --------- ---------
Cash Available for Paydown on WC Revolver and Acq. Facility 10,142 22,776 28,745 29,378
Minimum Cash Balance 10,142 10,142 10,142 10,142
Borrowing (Paydown) on WC Revolver and Acq. Facility 0 (12,634) (18,603) (19,236)
--------- --------- --------- ---------
Ending Cash Balance 10,142 10,142 10,142 10,142
Net Change in Cash $ 0 $ 0 $ 0 $ 0
========= ========= ========= =========
</TABLE>
Main Model Oct-7 Rev I with new Star & AGE 30 yr Petro
Projections and tax effect. For discussion purposes only.
14 of 19
<PAGE>
<TABLE>
<CAPTION>
(In thousands except per share and per unit data)
Estimated Normalized Projected
Star Pro Forma Debt Schedule ------------------------------------------------
1998 1998 1999 2000 2001 2002
---------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
8.04% 1 st Mortgage Notes
Beginning Balance $85,000 $85,000 85,000 $85,000 $85,000 $85,000
Borrowing - - - - - -
Amortization - - - - - -
---------- ------------ ---------- ---------- ---------- ----------
Ending Balance 85,000 85,000 85,000 85,000 85,000 85,000
Interest Payment 8.04% 6,834 6,834 6,834 6,834 6,834 6,834
7.17% Pearl Notes
Beginning Balance 11,000 11,000 11,000 11,000 11,000 11,000
Borrowing - - - - - -
Amortization - - - - - -
---------- ------------ ---------- ---------- ---------- ----------
Ending Balance 11,000 11,000 11,000 11,000 11,000 11,000
Interest Payment 7.17% 613 613 789 789 789 789
% of year Pearl Notes Outstanding 77.7% 77.7%
10.13% Sub Notes & Sr Notes
Beginning Balance 50,000 50,000 - - - -
Borrowing - - - - - -
Amortization (50,000) (50,000) - - - -
---------- ------------ ----------- ---------- ---------- ----------
Ending Balance - - - - - -
Interest Payment 10.13% - - - - - -
9.38% Sub Notes & Sr Notes
Beginning Balance 75,000 75,000 - - - -
Borrowing - - - - - -
Amortization (75,000) (75,000) - - - -
----------- ------------ ----------- ---------- ---------- -----------
Ending Balance - - - - - -
Interest Payment 9.38% - - - - - -
12.25% Sub Notes & Sr Notes
Beginning Balance 81,250 81,250 - - - -
Borrowing - - - - - -
Amortization (81,250) (81,250) - - - -
----------- ------------ ----------- ---------- ---------- ----------
Ending Balance - - - - - -
Interest Payment 12.25% - - - - - -
9.00% New Debt
Beginning Balance - - 120,000 126,127 134,268 134,328
Borrowing 120,000 120,000 6,127 8,141 60 60
Amortization - - - - - -
----------- ------------ ----------- ---------- ---------- ----------
Ending Balance 120,000 120,000 126,127 134,268 134,328 134,388
Interest Payment 9.00% 10,800 10,800 11,076 11,718 12,087 12,092
Exchange of 11.96% Senior Notes
Beginning Balance - - 63,126 63,126 63,126 63,126
Borrowing 63,126 63,126 - - - -
Amortization - - - - - -
----------- ------------ ----------- ---------- ---------- ----------
Ending Balance 63,126 63,126 63,126 63,126 63,126 63,126
Interest Payment 9.00% 5,681 5,681 5,681 5,681 5,681 5,681
8.00% Acq. & Other Notes Pay
Beginning Balance 16,507 16,507 14,508 8,381 240 180
Borrowing - - - - - -
Amortization (1,999) (1,999) (6,127) (8,141) (60) (60)
----------- ------------ ----------- ---------- ---------- ----------
Ending Balance 14,508 14,508 8,381 240 180 120
Interest Payment 8.00% 1,241 1,241 916 345 17 12
</TABLE>
Main Model Oct-7 Rev I with new Star & AGE 30 yr Petro
Projections and tax effect. For discussion purposes only.
15 of 19
<PAGE>
- -------------------------------------------------------------------------------
(In thousands except per share and per unit data)
<TABLE>
<CAPTION>
Estimated Normalized Projected
---------------------------------------------------
Star Pro Forma Debt Schedule (cont'd) 1998 1998 1999 2000 2001 2002
-------- --------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Exchange of 14.10% Senior Notes
Beginning Balance - - 6,520 6,520 6,520 6,520
Borrowing 6,520 6,520 - - - -
Amortization - - - - - -
--------- --------- -------- -------- -------- --------
Ending Balance 6,520 6,520 6,520 6,520 6,520 6,520
Interest Payment 11.50% 750 750 750 750 750 750
7.25% WC Revolver
Beginning Balance - - 4,785 4,785 4,785 4,785
Borrowing for Change in WC - - - - - -
Borrowing to Pay Full MQD - - - - - -
Borrowing (Payment) 4,785 4,785 - - - -
--------- --------- -------- -------- -------- --------
Ending Balance 4,785 4,785 4,785 4,785 4,785 4,785
Effective Avg WC Balance 23,600 23,600 10,814 9,393 9,393 9,393
Interest Payment 7.25% 1,711 1,711 784 681 681 681
7.25% Acquisition Facility
Beginning Balance - - 9,000 44,698 67,280 84,069
External Acquisitions 9,400 9,400 40,000 40,000 40,000 40,000
External Acquisitions at Beginning of 1999 - - - - - -
Internal Growth CapEx (400) (400) - - - -
Payment - - (0) (12,634) (18,603) (19,236)
Remaining Distributions to Repay Debt - (1,501) (4,302) (4,785) (4,608) (4,866)
--------- --------- -------- -------- -------- --------
Ending Balance 9,000 7,499 44,698 67,280 84,069 99,968
Interest Payment 7.25% ($15) ($69) $ 1,947 $ 4,059 $ 5,486 $ 6,671
Total Pro Forma Debt
Beginning Balance $ 318,757 $ 318,757 $313,939 $349,637 $372,219 $389,009
Amortization of Existing Debt (208,249) (208,249) (6,127) (8,141) (60) (60)
Exchange of Notes 69,646 69,646 - - - -
Borrowing for Changes in WC - - - - - -
Acquisition Borrowing 9,000 9,000 40,000 40,000 40,000 40,000
Borrowing to Pay Full MQD - - - - - -
Borrowing to Repay Existing Debt 120,000 120,000 6,127 8,141 60 60
Remaining Distributions to Repay Debt - (1,501) (4,302) (4,785) (4,608) (4,866)
Borrowing (Payments) on WC Revolver and
Acq. Facility 4,785 4,785 (0) (12,634) (18,603) (19,236)
--------- --------- -------- -------- -------- --------
Ending Balance 313,939 312,439 349,637 372,219 389,009 404,907
Preferred Stock
Beginning Balance 34,167 34,167 - - - -
Repayments (34,167) (34,167) - - - -
--------- --------- -------- -------- -------- --------
Ending Balance - - - - - -
Dividend Payment 14.33% - - - - - -
Interest Expense/Dividends 27,615 27,561 28,776 30,857 32,325 33,510
Chase Fees 692 692 692 692 692 692
--------- --------- -------- -------- -------- --------
Total Interest Payment/Dividends $ 28,307 $ 28,253 $ 29,468 $ 31,549 $ 33,017 $ 34,202
========= ========= ======== ======== ======== ========
</TABLE>
Main Model Oct-7 Rev I with new Star & AGE 30 yr Petro
Projections and tax effect. For discussion purposes only.
16 of 19
<PAGE>
STAR PRO FORMA DISTRIBUTION SCHEDULE OF ACTUAL DISTRIBUTIONS
(In thousands except per share and per unit data)
<TABLE>
<CAPTION>
Estimated Normalized Projected
----------------------------------------------------
1998 1998 1999 2000 2001 2002
--------- ---------- ---------- ---------- --------- ----------
Distributable Cash
- ------------------
<S> <C> <C> <C> <C> <C> <C>
Cash from Operations (excl chg in WC) 27,579 40,257 $ 43,204 $ 45,151 $ 47,414 $49,762
Maintenance CapEx (5,486) (5,486) (5,632) (5,739) (5,849) (5,961)
Other - - - - -
--------- ---------- ---------- ---------- --------- ----------
Total MLP Distributable
Cash Flow 22,093 34,771 37,572 39,412 41,565 43,801
Distributable Cash Flow Unit $ 1.53 $ 2.40 $ 2.60 $ 2.62 $ 2.59 $ 2.59
Distributable Cash Flow /
Unit Pro Forma for DPU Conversion
Average Units for Calculating Annual
- ------------------------------------
Distribution
- -------------
Common Units 10,842 10,842 10,842 11,129 11,839 12,699
SR Subordinated Units 2,767 2,767 2,767 3,070 3,373 3,373
Subordinated Units 567 567 567 567 567 567
General Partner Interest Unit
Equivalent 289 289 289 289 289 289
--------- ---------- ---------- ---------- --------- ----------
Total Units Outstanding 14,465 14,465 14,465 15,055 16,068 16,928
Distribution Levels $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30
- -------------------
MQD $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30
First Target $ 2.42 $ 2.42 $2.42 $ 2.42 $ 2.42 2.42
Second Target $ 2.84 $ 2.84 $2.84 $ 2,84 $ 2.84 2.84
Third Target $ 3.70 $ 3.70 $ 170 $ 3.70 $ 3.70 $ 3.70
Indicated Cash Distribution $ 2.30 $ 2.30 $2.30 $ 2.30 $ 2.30 $ 2.30
Distribution of MQD
- -------------------
Cash Available 22,093 34,771 37,572 39,412 41,565 43,801
Allocation to:
Common Units 22,093 24,936 24,936 25,596 27,229 29,207
SR Subordinated Units 0 6,364 6,364 7,061 7,758 7,758
Subordinated Units 0 1,305 1,305 1,305 1,305 1,305
General Partner Interest 0 665 665 665 665 665
First Target Distribution
- -------------------------
Cash Available 0 1,501 4,302 4,785 4,608 4,866
Cash Required for Target Distribution 0 1,736 1,736 1,808 1,932 2,037
Cash Required for Indicated
Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
SR Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Total Distributions to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
</TABLE>
Main Model Oct-7 Rev I with new Star & AGE 30 yr Petro
Projections and tax effect. For discussion purposes only.
17 of 19
<PAGE>
STAR GAS PRO FORMA SCHEDULE OF ACTUAL DISTRIBUTIONS (CONT'D)
(In thousands except per share and per unit data)
<TABLE>
<CAPTION>
Estimated Normalized Projected
-----------------------------------------------------
1998 1998 1999 2000 2001 2002
--------- ---------- ----------- --------- ---------- -----------
Second Target Distribution
- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash Available 0 0 0 0 0 0
Cash Required for Target Distribution 0 0 0 0 0 0
Cash Required for Indicated Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
SR Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Incentive Right 0 0 0 0 0 0
Incentive Right to GP Interest 0 0 0 0 0 0
Incentive Right to Sub Units 0 0 0 0 0 0
Incentive Right to Sr. Sub Units 0 0 0 0 0 0
Total Distributions to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Third Target Distribution
- -------------------------
Cash Available 0 0 0 0 0 0
Cash Required for Target Distribution 0 0 0 0 0 0
Cash Required for Indicated Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Incentive Right 0 0 0 0 0 0
Incentive Right to GP Interest 0 0 0 0 0 0
Incentive Right to Sub Units 0 0 0 0 0 0
Incentive Right to Sr. Sub Units 0 0 0 0 0 0
Total Distributions to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Remaining Distribution
- ----------------------
Cash Available 0 0 0 0 0 0
Cash Required for Indicated
Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Incentive Right 0 0 0 0 0 0
Incentive Right to GP Interest 0 0 0 0 0 0
Incentive Right to Sub Units 0 0 0 0 0 0
Incentive Right to Sr. Sub Units 0 0 0 0 0 0
Repay Indebtedness 0 1,501 4,302 4,785 4,608 4,866
Total Distributions to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
</TABLE>
Main Model Oct-7 Rev I with new Star & AGE 30 yr Petro
Projections and tax effect. For discussion purposes only.
Page 18 of 19
<PAGE>
STAR GAS PRO FORMA SCHEDULE OF ACTUAL DISTRIBUTIONS (CONT,D)
(In thousands except per share and per unit data)
<TABLE>
<CAPTION>
Estimated Normalized Projected
----------------------------------------------------------------
1998 1998 1999 2000 20O1 2002
---------- ---------- ----------- ------------ ----------- -----------
Total Distributions
- -------------------
<S> <C> <C> <C> <C> <C> <C>
Common units $22,093 $24,936 $24,936 $25,596 $27,229 $29,207
SR Subordinated Units 0 6,364 6,364 7,061 7,758 7,758
Subordinated Units 0 1,305 1,305 1,305 1,305 1,305
General Partner Interest 0 665 665 665 665 665
---------- --------- ----------- ------------ ---------- -----------
Total Distributions $22,093 $33,270 $33,270 $34,628 $36,957 $38,935
========== ========= =========== ============ ========== ===========
14,041 14,041 14,188 14,542 14,924 15,243
Total Distributions Per Units
- -----------------------------
Common Units $ 2.04 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30
SR Subordinated Units 0.00 2.30 2.30 2.30 2.30 2.30
Subordinated & GP Units 0.00 2.30 2.30 2.30 2.30 2.30
</TABLE>
Main Model Oct-7 Rev I with new Star & AGE 30 yr Petro
Projections and tax effect. For discussion purposes only.
19 of 19
<PAGE>
PETRO PRO FORMA, WORKING CAPITAL REQUIREMENTS
(IN 000S, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
ASSUMPTIONS
- -------------------------------------------------------------------------------------------------------
DEBT ATTRIBUTED TO PETRO:
9/30/98
Pro Forma Interest Annual
Balance Rate Interest
---------- --------- --------
<S> <C> <C> <C>
8.00 % Acquisition & Other Notes Pay $ 14,508 8.00% $ 1,161
9.00 % Exchanged Debt 63,126 9.00% 5,681
11.50% Exchanged Debt 6,520 11.50% 750
9.25% New Debt (a) 120,000 9.25% 11,100
--------
$18,692
</TABLE>
<TABLE>
<CAPTION>
NEW COMMON UNITS TO REFINANCE OLD DEBT & CONSENT FEE:
Price Per Number Annual
Amount to be Raised Share of Units MQD Distribution
- ---------------------------------------------------------- ---------- -------- ---------------
<S> <C> <C> <C> <C>
$141,473 $20.259 6,983 $2.30 $16,061
INCREASE IN MQD ON OLD COMMON UNITS Number Increase in Annual
of Units MQD Distribution
---------- ----------- --------------
Old Common Units 3,832 $0.10 $ 383
OPERATING WORKING CAPITAL REQUIRE $ 500
Tax Liability: $ 5,000
(a) AGE assumed rate of 9.25%
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
REQUIREMENT CALCULATION
- -------------------------------------------------------------------------------------------------
Closing Date
----------------------------------------
Jan 31 Feb 28 Mar 31
1999 1999 1999
------------ ---------- -----------
<S> <C> <C> <C>
Interest on Debt Attributed to Petro: $ 17,134 $ 15,576 $14,019
MQD on New Common Units 16,061 16,061 16,061
Increase in MQD on old Common Units 383 383 383
Operating Working Capital Requirement 500 500 500
Tax Liability 5,000 5,000 5,000
--------- -------- -------
Sub Total $ 39,078 $ 37,521 $35,963
Petro EBITDA
Historical Quarter Ended:
6/30/98 ($6,355) ($6,355) ($ 6,355)
9/30/97 (20,908) (20,908) (20,908)
12/31/97 16,716 16,716 16,716
-------
Projected Month Ended:
2/28/99 20,434
3/31/99 13,281 13,281
--------- --------
Sub Total $ 23,168 $ 2,734 ($10,547)
TOTAL $ 15,910 $ 34,787 $46,510
- -------------------------------------------------------------------------------------------------
WORKING CAPITAL REQUIREMENT 18,000 35,000 46,500
- -------------------------------------------------------------------------------------------------
Projected Month Ended Working Capital:
Standard Calculation $ 20,670 $ 36,836 $47,341
Excess Cash Assuming a March 31 Close $ 841
</TABLE>
<PAGE>
Appendix II to
FAIRNESS OPINION PRESENTATION TO THE
SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF
STAR GAS CORPORATION
Analyses performed under 15-year weather scenario
Changed Pages Only
CONFIDENTIAL
A,G. EDWARDS & SONS, INC.
INVESTMENT BANKING
October 16, 1998
<PAGE>
TABLE OF CONTENTS
Please note: Appendix II follows the same page numbering format as Appendix I
and contains only those pages that changed as a result of performing the
analyses under the 15-year weather scenario. Appendix II should be read in
conjunction with Appendix I.
Section
-------
Overview of Petroleum Heat and Power Co., Inc............... A
Overview of Star Gas Partners, L.P.......................... B
Pro Forma Merger Analysis................................... E
Relative Contribution Analysis.............................. G
Discounted Cash Flow Analysis............................... H
Comparable Transactions Analysis............................ I
Public Company Analysis..................................... J
Pro Forma Model............................................. K
<PAGE>
Overview of Petro
EBITDA Projections
($ in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Adjusted for
Actual Normalized Projected
------------------------------------------------------------------------
1998 1998 1999 2000 2001 2002
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EBITDA $37,630 $44,749 $46,463 $48,897 $51,040 $52,989
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Major Assumptions for 1999 - 2002
- ---------------------------------
[_] 15 Year Weather
[_] Flat Attrition.
[_] $30 million of acquisitions at 4.75x EBITDA multiple using half-year
convention.
[_] Increase in gross profit margin of $0.01 in 1999 and $0.005 in 2000 to
2002.
Page A - 8
<PAGE>
Overview of Star Gas
EBITDA Projections
($ in thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Adjusted for
Actual Normalized Projected
---------------------------------------------------------------------------
1998 1998 1999 2000 2001 2002
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EBITDA $18,781 $20,731 $23,032 $24,465 $25,898 $27,331
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Major Assumptions for 1999 - 2002
- ---------------------------------
[_] 15 Year Weather
[_] No growth in base business.
[_] $10 million of acquisitions at 6.5x EBITDA multiple using half-year
convention.
[_] No increase in gross profit margin.
Page B - 4
<PAGE>
PRO FORMA MERGER ANALYSIS
[_] A.G. Edwards analyzed the impact of the Transaction on the Partnership's
distributable cash flow per unit, the related accretion, common unit
coverage and total unit coverage on a pro forma basis.
---------------------------------------------------------
STAR GAS STAR GAS
STAND-ALONE PRO FORMA
------------- -----------
DCF PER UNIT
1998 Adjusted for Actual (a) $1.27 $1.53
1998 Normalized (b) 1.62 2.15
1999 Projected 1.77 2.31
ACCRETION / DILUTION
1998 Adjusted for Actual (a) $0.26
1998 Normalized (b) 0.53
1999 Projected 0.54
COMMON UNIT COVERAGE
1998 Adjusted for Actual (a) 0.96x 0.89x
1998 Normalized (b) 1.22 1.25
1999 Projected 1.30 1.33
TOTAL UNIT COVERAGE
1998 Adjusted for Actual (a) 0.58x 0.66x
1998 Normalized (b) 0.74 0.94
1999 Projected 0.81 1.00
--------------------------------------------------------------
(a) Projected results are adjusted for year to date actual
performance.
(b) Adjusted to represent normal weather.
Page E-1
<PAGE>
RELATIVE CONTRIBUTION ANALYSIS (a)
($ in thousands)
[_] A.G. Edwards analyzed the relative pro forma
contribution of both Star Gas and Petro to the
ownership of capital in the pro forma entity based on
Star Gas' and Petro's historical results from
operations and their respective projections.
Star Gas' Average
Gross Profit GROSS PROFIT
Contribution [GRAPH APPEARS HERE]
96-97 26.7%
98-99 29.0%
96-99 27.8%
Star Gas'Average EBITDA (c)
EBITDA Contribution [GRAPH APPEARS HERE]
96-97 35.4%
98-99 32.4%
96-99 33.8%
--------------------------
(a) For purposes of its analysis, A.G. Edwards converted
Petro's historical December 31 st fiscal year-end to
a September 30th fiscal year-end for comparison
purposes. Petro's projections are based on a December
31st calendar year end. Other measures of relative
contribution analysis are non-meaningful.
(b) Assumes normalized weather.
(c) Includes only heating oil EBITDA for Petro.
Page G - 1
<PAGE>
RELATIVE CONTRIBUTION ANALYSIS
($ IN THOUSANDS)
(continued)
FOR STAR GAS' IMPLIED FIRM VALUE
CONTRIBUTION OF
APPROXIMATELY 27.8% OF
THE COMBINED ENTITY'S
GROSS PROFIT AND 33.8%
OF THE COMBINED ENTITY'S
EBITDA, IT WILL RECEIVE [PIE CHART APPEARS HERE]
APPROXIMATELY 37.1% OF
THE IMPLIED FIRM VALUE.
Page G-2
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
[_] A.G. Edwards performed discounted cash flow analyses for Petro, Star Gas
and Star Gas Pro Forma using projected tax-adjusted operating cash flows
for 1999 through 2002, terminal values calculated on 2002 EBITDA, and
discount rates based on the related weighted average cost of capital.
Assumptions:
[_] Weighted average cost of capital ("WACC")
- Petro Stand Alone of 13.4% to 13.9% (calculated WACC of 13.6%)
- Star Gas Stand Alone of 6.8% to 7.2% (calculated WACC of 7.0%)
- Star Gas Pro Forma of 7.3% to 7.7% (calculated WACC of 7.5%)
[_] Terminal value EB1TDA multiple
- Petro Stand Alone of 6.0x to 8.0x (calculated normalized 1998 EBITDA
multiple of 6.5x)
- Star Gas Stand Alone and Star Gas Pro Forma of 9.0x to 11.0x (calculated
normalized 1998 EBITDA multiple of 10.6x)
Page H - 1
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
(continued)
<TABLE>
<CAPTION>
PETRO STAND ALONE
- ------------------------------------------------------------------------------
15 Year Terminal Value EBITDA Multiple
--------------------------------------------------------------
6.0x 6.5x 7.0x 7.5x 8.0x
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
13.4% $49,406 $65,422 $81,439 $97,455 $113,472
WACC 13.6% 47,103 62,984 78,865 94,746 110,628
13.9% 44,822 60,570 76,317 92,064 107,812
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STAR GAS STAND ALONE
- ------------------------------------------------------------------------------
15 Year Terminal Value EBITDA Multiple
--------------------------------------------------------------
9.0x 9.5x 10.0x 10.5x 11.0x
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
6.8% $92,914 $99,255 $105,597 $111,939 $118,281
WACC 7.0% 91,847 98,141 104,436 110,730 117,024
7.2% 90,790 97,037 103,284 109,532 115,779
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STAR GAS PRO FORMA
- ------------------------------------------------------------------------------
15 Year Terminal Value EBITDA Multiple
--------------------------------------------------------------
9.0x 9.5x 10.0x 10.5x 11.0x
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
7.3% $128,663 $136,782 $144,902 $153,021 $161,141
WACC 7.5% 127,328 135,389 143,449 151,510 159,570
7.7% 126,006 134,008 142,010 150,012 158,014
- ------------------------------------------------------------------------------
</TABLE>
Page H - 2
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
PETRO - STAND ALONE
EXCLUDING DISTRIBUTIONS FROM STAR GAS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Normalized
Cash Flow Summary (a): 1998 1999 2000 2001 2002 Terminal
- ----------------- ---------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
EBITDA $44,749 $46,463 $ 48,897 $51,040 $52,989
Taxes (500) (500) (500) (500)
Maintenance capital expenditures (3,000) (3,060) (3,121) (3,184)
Working capital increases (b) (500) (500) (500) (500)
-------- -------- -------- --------
Net operating cash flow (free cash flow) 42,463 44,837 46,919 48,805
----------------
Weighted average cost of capital (c) 13.6%
----------------
----------------
Terminal EBITDA multiple (d) 6.5x
----------------
Discount factor 0.8799 0.7742 0.6812 0.5994 0.5994
Terminal value (e) $344,429
-----------------
Present value $339,749 $37,363 $34,714 $31,963 $29,254 $206,455
----------------- -------- -------- -------- -------- ----------
Current net debt and preferred stock (f) ($276,765)
-----------------
-----------------
Net present value of equity $62,984
-----------------
</TABLE>
- --------------------------------------------------------------------------------
(a) Based on management projections.
(b) A.G. Edwards' estimate.
(c) Based on comparable companies' WACC.
(d) Petro's current firm value of $304.4 million/$46.9 million normalized 30-
year weather 1998 EBITDA = 6.5x, which represents a multiple of current year
normalized EBITDA.
(e) Terminal value calculated using EBITDA multiple.
(f) Net of $33.2 million of cash. Market value of debt used.
Page H-3
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
PETRO - STAND ALONE USING STAR GAS' PRO FORMA WACC
EXCLUDING DISTRIBUTIONS FROM STAR GAS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Normalized
Cash Flow Summary (a): 1998 1999 2000 2001 2002 Terminal
- --------------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
EBITDA $ 44,749 $ 46,463 $ 48,897 $ 51,040 $ 52,989
Taxes (500) (500) (500) (500)
Maintenance capital expenditures (3,000) (3,060) (3,121) (3,184)
Working capital increases (b) (500) (500) (500) (500)
---------- ---------- ---------- ----------
Net operating cash flow (free
cash flow) 42,463 44,837 46,919 48,805
Weighted average cost of capital (c) 7.5%
---------
Terminal EBITDA multiple (d) 6.5x
---------
Discount factor 0.9299 0.8647 0.8041 0.7477 0.7477
Terminal value (e) $ 344,429
Present value $ 409,993 $ 39,486 $ 38,770 $ 37,725 $ 36,490 $ 257,522
---------- ---------- ---------- ---------- ---------- ----------
Current net debt and preferred
stock (f) $(276,765)
----------
Net present value of equity $ 133,228
----------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on management projections.
(b) A.G. Edwards' estimate.
(c) Based on comparable companies' WACC.
(d) Petro's current firm value of $304.4 million/$46.9 million normalized
30-year weather 1998 EBITDA = 6.5x, which represents a multiple of current
year normalized EBITDA.
(e) Terminal value calculated using EBITDA multiple.
(f) Net of $33.2 million of cash. Market value of debt used.
Page H-4
<PAGE>
Discounted Cash Flow Analysis
Star Gas - Stand Alone
($ in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Normalized
Income Statement Summary (a): 1998 1999 2000 2001 2002 Terminal
- ---------------------------- ---------- ---------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
EBITDA 20,731 23,032 24,465 25,898 27,331
% increase 11.1% 6.2% 5.9% 5.5%
Net income 1,395 2,075 2,213 2,305 2,560
Cash Flow Summary:
- -----------------
After-tax EBI 10,649 11,097 11,656 12,379
Depreciation and amortization 12,358 13,343 14,217 14,927
Maintenance capital expenditures (2,657) (2,705) (2,753) (2,803)
Working capital increases (b) (500) (500) (500) (500)
--------- --------- --------- ---------
Net operating cash flow (free cash flow) 19,850 21,235 22,620 24,003
Weighted average cost of capital (c) [ 7.0%]
Terminal EBITDA multiple (d) [ 10.6x]
Discount factor 0.9342 0.8728 0.8154 0.7618 0.7618
Terminal value (e) $289,709
Present value [$294,513] $18,545 $18,534 $18,445 $18,286 $220,703
--------- --------- --------- --------- ---------
Current net debt (f) ($109,285)
Net present value of equity $185,228
==========
Common units/Total units (g) 60.5%
Equity value to common units (h) [$111,989]
</TABLE>
- ------------------------------------------
(a) Based on management projections.
(b) A.G. Edwards' estimate.
(c) Based on comparable companies' WACC.
(d) Star's current firm value of $234.1 million/$22.1 million normalized 30-year
weather 1998 EBITDA=10.6x, which represents a multiple of current year
normalized EBITDA.
(e) Terminal value calculated using EBTIDA multiple.
(f) Represents total projected 9/30/98 debt less cash.
(g) Total units include common, subordinated and GP units.
(h) Current nearest value of common units is 3,858 units * $19.563 unit
price=$75,472.
Page H-5
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
STAR GAS - PRO FORMA
($ IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
NORMALIZED
INCOME STATEMENTS SUMMARY (a): 1998 1999 2000 2001 2002 TERMINAL
- ------------------------ ---------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
EBITDA 65,980 69,995 73,862 77,438 80,820
% increase 6.1% 5.5% 4.8% 4.4%
Net income (3,711) (3,694) (7,056) (10,430) (13,719)
Cash Flow Summary:
- ------------------
After-tax EBI 25,310 23,373 21,255 19,101
Depreciation and amortization 43,661 49,463 55,159 60,694
Maintenance capital expenditures (5,657) (5,765) (5,874) (5,987)
Working capital increases (b) (1,000) (1,000) (1,000) (1,000)
-------- -------- -------- --------
Net operating cash flow (free cash flow) 62,314 66,071 69,540 72,808
Weighted average cost of capital (c) 7.5%
----------
Terminal EBITDA multiple (d) 10.6x
----------
Discount factor 0.9299 0.8647 0.8041 0.7477 0.7477
Terminal value (e) $856,692
Present value $865,956 $57,945 $57,131 $55,914 $54,437 $640,530
---------- -------- -------- -------- -------- ------------
Less net debt (f) ($291,997)
----------
Net present value of equity $573,959
==========
Original common units/Total units (g) 26.7%
Equity value to common units (h) $153,122
----------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on management projections. See Appendix K for model.
(b) A.G. Edwards' estimate
(c) Based on comparable companies' WACC.
(d) Star's current firm value of $234.1 million/$22.1 million normalized 30-year
weather 1998 EBITDA = 10.6x, which represents a multiple of current year
normalized EBITDA.
(e) Terminal value calculated using EBITDA multiple.
(f) Represents total proforma projected 9/30/98 debt less cash and cash
collateral.
(g) Total units include common, newly issued common, senior subordinated,
subordinated and GP units.
(h) Current market value of common units is 3,858 units* $19.563 unit price =
$75,472.
Page H - 6
<PAGE>
COMPARABLE TRANSACTIONS ANALYSIS
FIRM VALUATION
[_] A.G. Edwards noted that public disclosure regarding transactions in
the retail home heating oil distribution industry was extremely
limited.
[_] A.G. Edwards analyzed the financial terms related to divestitures by
Petro of certain of its retail home heating oil branches and compared
them to the implied multiples of the aggregate purchase price of
Petro's heating oil assets.
[_] Petro has sold three branches for an average EBITDA multiple of 9.0x.
[_] A.G. Edwards calculated the purchase price of Petro's heating oil
assets and calculated multiples based on Petro's EBITDAs.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Purchase Price of Heating Oil Assets
-------------------------------------------
<S> <C> <C> <C>
Equity purchase price of heating oil assets
including CUs $ 25,549
Cost of Debt to be Redeemed ($206,250 + $2,844 premium) 209,094
Cost of Debt to be Assumed 69,646
Cost of Preferred stock at Redemption Value 31,767
Consent Fees 2,110
Transaction Fees 19,343
---------
Aggregate purchase price of heating oil assets $ 357,509
=========
Multiples
----------------------------------------- -----------
Multiples Notes
----------- ---------------------------
Normalized 1998 EBITDA budget (a) 44,749 8.0 X As a multiple of aggregate
1999 Projected EBITDA (a) 46,463 7.7 x transaction value.
-----------
As a multiple of aggregate
transaction value.
</TABLE>
___________________________________________________________________
(a) Calculated as gross profit minus SG&A expense and direct
delivery expense.
Page I - 1
<PAGE>
PUBLIC COMPANY ANALYSIS
[_] A.G. Edwards compared certain financial and market information of Star
Gas on a historical and pro forma basis to that of certain public
propane master limited partnerships which A.G. Edwards deemed relevant
for the purposes of this analysis. A.G. Edwards reviewed the trading
multiples from a total of six master limited partnerships.
[_] The selected propane master limited partnerships are as follows:
- AmeriGas Partners, L.P. - Heritage Propane Partners,
L.P.
- Cornerstone Propane Partners, L.P. - National Propane Partners,
L.P.
- Ferrellgas Partners, L.P. - Suburban Propane Partners,
L.P.
[_] No company used in the analysis is identical to Star Gas.
<TABLE>
<CAPTION>
===========================================================================================================
PUBLIC COMPARABLES COMPANIES (a)
===========================================================================================================
Public Public
Pro forma Company Company
Star Star Medians Ranges
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Yield 11.2% 11.8% 10.1% 9.1% to 22.3%
Firm value/LTM EBITDA 12.5x (b) 10.0x (b) 11.6x 9.0x to 12.7x
Firm value/1999E EBITDA 10.2x 8.1x 9.2x 8.4x to 11.7x
Equity Market Cap/LTM DCF 15.4x (c) 12.5x (c) 13.4x 8.1x to 15.3x
Equity Market Cap/1999E DCF 10.6x 8.1x 9.8x 4.9X to 12.2x
LTM common unit coverage 1.0x (d) 0.9x (d) 1.5x 0.6x to 1.6x
1999E common unit coverage 1.3x 1.3x 2.1x 1.1x to 2.3x
LTM total unit coverage 0.6x (d) 0.7x (d) 0.7x 0.4x to 1.2x
1999E total unit coverage 0.8x 1.0x 1.0x 0.7x to 1.2x
-----------------------------------------------------------------------------------------------------------
</TABLE>
(a) Public comparable companies include APU, CNO, FGP, HPG, NPL and
SPH.
(b) Firm value/adjusted for actual 1998 budget EBITDA.
(c) Equity market cap/adjusted for actual 1998 budget EBITDA.
(d) Adjusted for actual 1998 budget.
Page J-1
<PAGE>
PUBLIC COMPANY ANALYSIS
($ IN MILLIONS, EXCEPT PER UNIT DATA)
<TABLE>
<CAPTION>
====================================================================================================================================
Closing Implied Implied Common
Price on Market Value Firm Distribution Units/
Company Ticker (10/14/98) of Equity Value per unit Yield Total Units
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Star Gas Partners, L.P. (a) SGU $19.563 $ 124.9 $ 234.1 $2.20 11.2% 60.5%
AmeriGas Partners, L.P. APU 24.125 1,031.2 1,739.4 2.20 9.1% 52.8%
Cornerstone Propane Partners, L.P. (c) CNO 18.000 365.2 596.7 2.16 12.0% 66.8%
Ferrellgas Partners, L.P. (d) FGP 20.000 638.6 1,131.2 2.00 10.0% 47.0%
Heritage Propane Partners, L.P. HPG 20.813 180.0 354.6 2.00 9.6% 56.3%
National Propane Partners, L.P. NPL 9.438 108.2 250.9 2.10 22.3% 59.6%
Suburban Propane Partners, L.P. (e) SPH 19.625 575.3 922.5 2.00 10.2% 75.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Mean 12.2% 59.6%
Median 10.1% 58.0%
====================================================================================================================================
Pro Forma $19.563 $ 276.5(f) $ 568.5(g) $2.30 11.8% 74.9%
<CAPTION>
====================================================================================================================================
LTM Common LTM Total FY99E FY99E Common FY99E Total
Unit Coverage Unit Coverage DCF/Unit Unit Coverage Unit Coverage
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Star Gas Partners, L.P. (a) 1.0x (b) 0.6x (b) $1.77 1.3x 0.8x
AmeriGas Partners, L.P. l.4x 0.8x 2.39 2.1x 1.1x
Cornerstone Propane Partners, L.P. (c) 0.8x 0.6x 1.51 1.1x 0.7x
Ferrellgas Partners, L.P. (d) 1.5x 0.7x 2.15 2.3x 1.1x
Heritage Propane Partners, L.P. 1.5x 0.8x 2.38 2.2x 1.2x
National Propane Partners, L.P. 0.6x 0.4x 1.87 NA 0.9x
Suburban Propane Partners, L.P. (e) 1.6x 1.2x 1.98 1.3x 1.0x
- ------------------------------------------------------------------------------------------------------------------------------------
Mean 1.3x 0.7x 1.8x 1.0x
Median 1.5x 0.7x 2.lx 1.0x
===================================================================================================================================
Pro Forma 0.9X(b) 0.7x(b) 2.31 1.3x 1.0x
</TABLE>
______________________________________
1999 estimates per A. G. Edwards' research, except for Star and Pro Forma. 1999
estimates for National Propane from Merril Lynch research report dated July
29,1998.
Implied Firm Value equals common, subordinated and GP units, multiplied by the
market price of common units plus debt, less cash.
(a) Pro forma for the Pearl Gas acquisition and the common unit offering.
(b) For Star and Pro Forma only, LTM DCF figures are adjusted for actual 1998
budget DCF estimates.
(c) Financial information pro forma for common unit offering. Maintenance
capital expenditures assumed to be 8% of EBITDA due to lack of disclosure.
(d) Maintenance capital expenditures assumed to be 8% of EBITDA due to lack of
disclosure.
(e) Financial figures exclude $5.1 million gain from sale of minority interest.
(f) Calculated as: (10,841 common units x $19.563) + (2,767 senior subordinated
units x $18.52) + (857 junior subordinated and GP units x $15.41).
(g) $276.5 in equity plus $313.9 pro forma debt, less $21.9 in cash and cash
collateral.
Page J - 2
<PAGE>
PUBLIC COMPANY ANALYSIS
($ IN MILLIONS, EXCEPT PER UNIT DATA)
(continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Long Term LTM Firm Value/ Firm Value/ Equity Equity
Debt/ EBITDA/ LTM 1999E Market Cap/ Market Cap/
Firm Value Int. Exp. EBITDA EBITDA LTM DCF 1999E DCF
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Star Gas Partners, L.P. 44.8% 2.4x (a) 12.5x (a) 10.2x 15.4x (a) 10.6x
AmeriGas Partners, L.P. 39.9% 2.2x 11.8X 9.9X 14.8x 10.4x
Cornerstone Propane Partners, L.P. 39.7% 2.4x 12.7x 11.1X 15.3x 12.2x
Ferrellgas Partners, L.P. 44.1% 2.1x 11.4x 9.0X 14.2x 9.5x
Heritage Propane Partners, L.P. 49.8% 2.6x 9.7x 9.0x 12.6x 8.8x
National Propane Partners, L.P. 55.2% 2.6x 12.7x 9.3x 12.0x 4.9x
Suburban Propane Partners, L.P. 46.4% 3.3x 9.0x 8.4x 8.1x 10.1x
- ------------------------------------------------------------------------------------------------------------------------------------
Mean 45.8% 2.6x 11.2x 9.5x 12.9x 9.3x
Median 45.2% 2.5x 11.6x 9.2x 13.4x 9.8X
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma 55.2% 2.0x (a) 10.0x (a) 8.1x 12.5x (a) 8.1x
</TABLE>
______________________________________________
EBITDA is defined as net income (loss) before extraordinary items plus interest,
income taxes, depreciation and amortization, impairment expense, and other
non-recurring and non-operating items.
(a) For Star and Pro forma only, LTM figures use adjusted for actual 1998
budget estimates.
Page J-3
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
TRANSACTION SUMMARY AND ASSUMPTIONS
(in thousands except per share and per unit data)
- ------------------------------------------------------------------------------------------------------------------------------------
SUMMARY CASH FLOW AND COVERAGE ANALYSIS
- ------------------------------------------------------------------------------------------------------------------------------------
($ on per Unit basis)
ESTIMATED NORMALIZED PROJECTED
-----------------------------------------------------
1998 1998 1999 2000 2001 2002
--------- ---------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
STAR STAND ALONE
EBITDA $ 18,781 $ 20,731 $ 23,032 $ 24,465 $ 25,898 $27,331
Interest Expense (7,922) (7,662) (8,574) (8,884) (9,351) (9,819)
Maintenance CapEx (2,710) (2,710) (2,657) (2,705) (2,753) (2,803)
Other (25) (25) (25) (25) (25) (25)
--------- ---------- --------- ---------- ---------- ---------
Distributable Cash Flow $ 8,124 $ 10,334 $ 11,776 $ 12,851 $ 13,769 $ 14,684
========= ========== ========= ========== ========== =========
DCF per Common Unit $ 2.11 $ 2.68 $ 2.87 $ 2.85 $ 2.87 $ 2.90
DCF / Common Unit MQD 0.96 x 1.22 x 1.30 x 1.30 x 1.31 x 1.32 x
DCF per Total Unit $ 1.27 $ 1.62 $ 1.77 $ 1.83 $ 1.88 $ 1.93
DCF / Total MQD 0.58 x 0.74 x 0.81 x 0.83 x 0.85 x 0.88 x
Indicated Distribution per Common Unit $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20
STAR PRO FORMA
EBITDA
------
Star $ 18,781 $ 20,731 $ 23,032 $ 24,465 $ 25,898 $ 27,331
Petro 37,630 44,749 46,463 48,897 51,040 52,989
Synergies 500 500 500 500 500 500
--------- ---------- --------- ---------- ---------- ---------
Total 56,911 65,980 69,995 73,862 77,438 80,820
--------- ---------- --------- ---------- ---------- ---------
Interest Expense (28,307) (28,307) (29,004) (30,429) (31,685) (32,820)
Maintenance CapEx (5,486) (5,486) (5,657) (5,765) (5,874) (5,987)
Other (1,025) (1,025) (1,025) (1,025) (1,025) (1,025)
--------- ---------- --------- ---------- ---------- ---------
Distributable Cash Flow 22,093 31,162 34,309 36,643 38,854 40,988
========= ========== ========= ========== ========== =========
DCF per Common Unit $ 2.04 $ 2.87 $ 3.06 $ 3.02 $ 2.95 $ 2.87
DCF per Sr. Sub & Common Unit $ 1.62 $ 2.29 $ 2.45 $ 2.46 $ 2.44 $ 2.41
DCF per Total Unit $ 1.53 $ 2.15 $ 2.31 $ 2.33 $ 2.32 $ 2.29
Indicated Distribution per Common Unit $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
ACCRETION/DILUTION
- ------------------------------------------------------------------------------------------------------------------------------------
DCF per Unit - Star Stand Alone $ 1.27 $ 1.62 $ 1.77 $ 1.83 $ 1.88 $ 1.93
DCF per Unit - Pro Forma $ 1.53 $ 2.15 $ 2.31 $ 2.33 $ 2.32 $ 2.29
- ------------------------------------------------------------------------------------------------------------------------------------
ACCRETIVE ($/UNIT) $ 0.25 $ 0.54 $ 0.54 $ 0.50 $ 0.44 $ 0.36
Accretive (%) 20.0% 33.0% 30.2% 27.5% 23.4% 18.9%
- ------------------------------------------------------------------------------------------------------------------------------------
PRO FORMA HEATING OIL DCF PER UNIT $ 2.74 $ 2.73 $ 2.66 $ 2.56
DPUs ISSUED AS Sr SUB UNITS AT BEG OF YEAR - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PRO FORMA CREDIT ANALYSIS
- ------------------------------------------------------------------------------------------------------------------------------------
EBITDA/Interest 2.01 x 2.33 x 2.41 x 2.43 x 2.44 x 2.46 x
LT Debt/EBITDA 5.43 4.69 4.74 4.73 4.72 4.71
LT Debt/EBITDA (Pro Forma for Full-Year
Acquisitions) 5.27 4.55 4.50 4.50 4.50 4.50
# of Units Issued to Meet Debt Covenant - - 772 1,007 1,075 1,126
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PRO FORMA COVERAGE RATIOS
- ------------------------------------------------------------------------------------------------------------------------------------
MQD Coverage
------------
Common Unit 0.89 x 1.25 x 1.33 x 1.31 x 1.28 x 1.25 x
Senior Subordinated Unit 0.71 1.00 1.07 1.07 1.06 1.05
Total Unit 0.66 0.94 1.00 1.01 1.01 1.00
Indicated Distribution Coverage
-------------------------------
Common Unit 0.89 x 1.25 x 1.33 x 1.31 x 1.28 x 1.25 x
Senior Subordinated Unit 0.71 1.00 1.07 1.07 1.06 1.05
Total Unit 0.66 0.94 1.00 1.01 1.01 1.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT MODEL ASSUMPTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Scenario Version: 15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01, flat att.
Petro Acqs/yr $30,000
Star Acqs/yr $10,000 G.P. Interest Subordinate
Price per Petro Share $ 2.42
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EQUITY RESTRUCTURING
- ------------------------------------------------------------------------------------------------------------------------------------
PETRO
------------------------------------------------
PUBLIC INSIDERS
---------------- ----------------
<S> <C> <C>
Securities Offered Sr Sub Sub & GP
Incentive Rights 76% 24%
Value Offered $ 2.42 $ 2.45
Current Market $ 1.31 $ 1.31
Premium to Market 84.1% 86.7%
Implied Value of Security Offered $ 18.52 $ 15.41
Security Offered per Share 0.13064 0.15920
Total Shares 14,609 11,953
Insiders to Receive Sr. Sub 6,572 (6,572)
Shares to Be Converted 21,181 5,382
Units Offered 2,767 857
DPUs Offered 909
Implied Value of GP/Unit $ 15.41
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SOURCES AND USES OF FUNDS
- ------------------------------------------------------------------------------------------------------------------------------------
SOURCES: USES:
<S> <C> <C> <C>
Excess Cash on Hand $ 841 Repay Debt Principal $206,250
New Star Debt 120,O00 Redeem Preferred 31,767
New MLP Equity 139,363 Premium on Redemption/
New MLP E Equity - Exchange/Defeasance 2,844
Equity for Consent Fees 2,110 Consent Fees 2,110
Cash Balance 0 Transaction Fees 19,343
--------- ----------
$262,314 $262,314
========= ==========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCING SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------------
AMOUNT RATE UNIT PRICE
----------- ----------- ----------------
<S> <C> <C> <C>
New Common Raised $ 139,363 $ 20.26
New Debt Raised 120,000 9.00%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
UNITS OUTSTANDING
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT PRO FORMA
----------------------- ------------------------------
UNITS % UNITS %
----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Existing Common 3,858 60.5% 3,858 26.7%
New Common 0 0.0% 6,983 48.3%
New Common for Acquisitions 0 0.0% 0 0.0%
Common to Petro Shareholders 0 0.0% 0 0.0%
Sr Sub (Petro S/H's) 0 0.0% 2,767 19.1%
Existing Sub 2,396 37.5% 567 3.9%
Implied GP 128 2.0% 289 2.0%
----------- --------- ----------- -----------
Total Units 6,382 100.0% 14,465 100.0%
=========== ========= =========== ===========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Main Model Oct-7 Rev I with new Star & AGE 30 yr Petro
Projections and tax effect. For discussion purposes only.
1 of 19
<PAGE>
<TABLE>
<CAPTION>
================================================================================
TRANSACTION SUMMARY AND ASSUMPTIONS
-------------------------------------------------------------------------
(in thousands except per share and per unit data) 15-yr;$30mm @ 4.75x mid-year; $.01 '99,$.005 '00-'01, flat att.
$10,000 Star Acqs/yr
$30,000 Petro Acqs/yr G.P. Interest Subordinate
$2.42 / Petro Share
-------------------------------------------------------------------------
OPERATING ASSUMPTIONS
- ----------------------------------------------------------------------------
PETRO STAR STAR NORMAL
--------- -------- --------------
<S> <C> <C> <C>
Normalized Maintenance CapEx $2,776 $ 2,710 $2,710
Maintenance CapEx Life 15 yrs 15 yrs
Growth CapEx Life 6.5 yrs 15 yrs
Marginal Tax Rate 33.0% 33.0%
Deferred Tax Percent 0.0%
Required Cash at Beginning for Initial Distribution 7,956
Minimum Star Stand Alone Cash Balance $ 500
Minimum Star Pro Forma Cash Balance $10,142
Consolidation Savings $ 500
Annual Bank Fees $ 692 $ 222
Last 20 Days Average Stock Price @ 10/14 $ 1.31 $ 20.26
Annual Transaction/Deal Expenses $ 450
Debt/EBITDA Bank Covenant Ratio 4.5x
Issue Equity to Meet Bank Debt Covenants (Y/N)? yes
</TABLE>
<TABLE>
<CAPTION>
DEBT RESTRUCTURING
- ---------------------------------------------------------------------------------------------------------------
PROJECTED
12/31/97
PRIVATES: % TENDERED PRINCIPAL STRATEGY PRICE
------------- --------------- ----------------- ----------------
<S> <C> <C> <C> <C>
11.96% Sr Notes 100.0% 60,000 Exchange 105.2%
14.10% Sr Notes 100.0% 3,100 Exchange 105.2%
14.10% Sub Notes 100.0% 3,100 Exchange 105.2%
14.33% Pfd Stock 100.0% 4,167 Neg. Tender 100.0%
PUBLICS:
10.13% Sub Notes & Sr Notes 100.0% 50,000 Neg. Tender 100.0%
9.38% Sub Notes & Sr Notes 100.0% 75,000 Tender 100.0%
12.25% Sub Notes & Sr Notes 100.0% 81,250 Tender 103.5%
12.88% Pfd Stock 100.0% 30,000 Tender 92.0%
</TABLE>
<TABLE>
<CAPTION>
NEW SECURITY ASSUMPTIONS
- ------------------------------------------------------
NEW MLP EQUITY
- --------------
<S> <C>
Gross Proceeds $139,363
Common Units for Consent Fee 2,110
Common Units to Enron -
Total New Equity Value --------
Common Units to Public $141,473
6,983 units
</TABLE>
<TABLE>
<CAPTION>
NEW STAR DEBT
-------------
<S> <C> <C> <C>
Gross Proceeds 120,000
Gross Spread % 5.0% Gross Spread % 3.0%
Gross Spread $ $6,968 Gross Spread $ $ 3,600
Offering Price/Share (current market price) $20.26 Coupon 9.00%
</TABLE>
<TABLE>
<CAPTION>
ACQUISITION ASSUMPTIONS
- ------------------------------------------------------------------------------------
PETRO MULTIPLE 1998 1999 2000 2001 2002
- ----- ------------ ------------- ------------ ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Amount 4.75x $ 0 $ 30,000 $ 30,000 $ 30,000 $ 30,000
Timing End Mid Mid Mid Mid
% EBITDA 0.0% 50.0% 50.0% 50.0% 50.0%
Amount 4.75x $ 0
Timing Beg
% EBITDA in Initial Year 100.0%
Units Issued at: Common $ 22.00
Sr. Sub. $ 18.52
STAR STAND-ALONE
- ----------------
Weather 15 Year
Amount 6.50x $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000
Timing End Mid Mid Mid Mid
% EBITDA in Initial Year 0.0% 50.0% 50.0% 50.0% 50.0%
Amount Financed with Equity $ 600 $ 11,169 $ 6,641 $ 6,375 $ 6,082
New Units @: 27 508 302 290 276
Units Issued at Price of: $ 22.00 $ 22.00 $ 22.00 $ 22.00 $ 22.00
Amount 6.50x $ 0
Timing Beg
% EBITDA in Initial Year 100.0%
</TABLE>
<TABLE>
<CAPTION>
EXCHANGE ASSUMPTIONS
- ------------------------------------------------------------------------------------
EXISTING GETS NEW UNITS OF:
---------------------------------------------------------------
SHAREHOLDERS OF: SHARES COMMON SR SUB JNR SUB G.P. DPUs (1)
- ----------------------------------------------------------- ------------ ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Public Class A Shareholders 14,609 0 1,909 0 0 479
Insider Class B Shares 11 0 0 0 0
Insider Class C Shareholders 0
Class A & C Shares to Receive Jr Sub & GP 5,382 0 0 567 289 215
Class A Shares to Receive Sr Sub 6,572 0 859 0 0 215
-------- ----------- ----------- --------- --------- ----------
26,574 0 2,767 567 289 909
E Sr. Sub - -
----------- ----------
Total 2,767 909
=========== ==========
</TABLE>
(1) Includes 2.0% G.P. Interest.
<TABLE>
<CAPTION>
TRANSACTION COSTS SUMMARY
--------------------------------------------------------------
<S> <C>
New MLP Equity $ 6,968
New Star Debt 3,600
Fairness Opinion 1,000
Financial Advisory 1,500
Exchange Fees on Public Petro Debt/Preferred 1,375
Legal Fees 2,500
Printing 1,000
Account Fees 250
Other:
-----
Environmental 350
Rating Agencies 100
Roadshow 200
Asset Appraisal 250
Solicitation expenses 100
Other Bank Fees 150
--------
$19,343
========
</TABLE>
<TABLE>
<CAPTION>
HEATING OIL DPU TRIGGER
----------------------
DCF/Unit % Convert
<S> <C>
$2.90 33.3%
</TABLE>
<TABLE>
<CAPTION>
CONSENT FEE CALCULATION
- ---------------------------------------------
<S> <C>
% of Petro Stock 3.0%
New Petro Shares 797
Exchange Ratio 7.65x
--------
New Common Units 104
Common Unit Price $20.26
--------
Implied Value $2,110
========
</TABLE>
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections
and tax effect. For discussion purposes only.
2 of 19
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SUMMARY DISTRIBUTIONS
-------------------------------------------------------------------------
(in thousands except per share and per unit data) 15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005'00-'01, flat att.
$10,000 Star Acqs/yr
$30,000 Petro Acqs/yr G.P. Interest Subordinate
$2.42 / Petro Share
-------------------------------------------------------------------------
PROJECTED
-----------------------------------------
UNITHOLDER CLASS (1) 1998 1999 2000 2001 2002
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
COMMON UNITHOLDERS
MQD $25,823 $27,869 $30,264 $32,796
Incentive Distributions - - - -
-------- -------- -------- --------
Total $25,823 $27,869 $30,264 $32,796
CAPITAL
Existing Sr. Sub Units - - - -
Number of DPUs Issued as Sr Sub Units - - - -
New Sr. Sub Units - - - -
-------- -------- -------- --------
Total Sr. Sub Units - - - -
Existing Common - - - -
New Common - - - -
-------- -------- -------- --------
Total Common - - - -
Common MQD - - - -
Common Incentive Distributions - - - -
Sr. Sub MQD - - - -
Sr. Sub. Incentive Distributions - - - -
-------- -------- -------- --------
Total Distributions - - - -
SENIOR SUBORDINATED UNITHOLDERS (1)
Number of DPUs Issued as Sr Sub Units - - - -
Base MQD $ 6,364 $ 6,364 $ 6,364 $ 6,364
Incremental MQD from DPUs Issued as Sr. Sub Units - - - -
Incentive Distributions - - - -
Incremental Incentive Distributions from DPUs Issued as Sr. Sub Units - - - -
-------- -------- -------- --------
Total $ 6,364 $ 6,364 $ 6,364 $ 6,364
SUBORDINATED UNITHOLDERS (1)
Numbers of DPUs Issued as Sr Sub Units - - - -
Base MQD $ 1,305 $ 1,305 $ 1,305 $ 1,211
Incremental MQD from DPUs Issued as Sr. Sub Units - - - -
Incentive Distributions - - - -
Incremental Incentive Distributions from DPUs Issued as Sr. Sub Units - - - -
-------- -------- -------- --------
Total $ 1,305 $ 1,305 $ 1,305 $ 1,211
GENERAL PARTNER
Numbers of DPUs Issued as Sr Sub Units - - - -
Base MQD $ 665 $ 665 $ 665 $ 617
Incremental MQD from DPUs Issued as Sr. Sub Units - - - -
Incentive Distributions - - - -
Incremental Incentive Distributions from DPUs Issued as Sr. Sub Units - - - -
-------- -------- -------- --------
Total $ 665 $ 665 $ 665 $ 617
UNITHOLDER CLASS TOTAL
Common Unitholders $25,823 $27,869 $30,264 $32,796
Senior Subordinated Unitholders 6,364 6,364 6,364 6,364
Subordinated Unitholders 1,305 1,305 1,305 1,211
General Partner 665 665 665 617
-------- -------- -------- --------
Total $34,158 $36,204 $38,599 $40,988
DISTRIBUTIONS TO DPUS CONVERTED TO SENIOR SUBORDINATED UNITS
MQD $ 0 $ 0 $ 0 $ 0
Incentive Distributions - - - -
-------- -------- -------- --------
Total - - - -
check - - - -
</TABLE>
________________________
(1) Reflects distributions for respective Unitholder class. All DPUs are
issued as Senior Subordinated Units but are distributed pro rata to all
Petro shareholders. Consequently, the Subordinated Unitholder class
includes DPUs which have been issued as Senior Subordinated Units.
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro
Projections and tax effect. For discussion purposes only.
3 of 19
<PAGE>
<TABLE>
<CAPTION>
=======================================================================================================================
TRANSACTION SUMMARY AND ASSUMPTIONS
(in thousands per share and per unit data)
15-yr; $30mm @ 4.75x mid-year; $.01'99, $.005 00-'01, flat att.
RECAPITALIZATION ASSUMPTIONS
- ------------------------------------------------------------------------------------------------------------------------
(D)EFEASE
(T)ENDER
(R)EDEEM PRINCIPAL
LOCKUP (E)XCHANGE AS OF MATURITY PERIOD COUPON/ SINKING FUND PAYMENT
----------------- ----------------------
PETRO INSTRUMENTS: PREMIUM (N)OTHING 9/30/98 M/D YR DIVIDEND PAYMENT YEAR START
- -------------------------------- -------------------- --------- --- -- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11.96% Sr Notes e $ 60,000 v 1-Oct 0 11.960% $ 0 0
14.10% Sr Notes e 3,100 v 15-Jan 2001 14.100% - 1997
14.10% Sub Notes e 3,100 v 15-Jan 2001 14.100% - 1997
10.13% Sub Notes & Sr Notes 0.0% t 50,000 v 1-Apr 2003 10.130% -
9.38% Sub Notes & Sr Notes 0.0% t 75,000 v 1-Feb 2006 9.375% -
12.25% Sub Notes & Sr Notes 0.0% t 81,250 v 1-Feb 2005 12.250% -
8.00% Acq. & Other Notes Pay n 14,508 v 0 8.000% - 0
8.25% Existing Credit Facility n 0 v 1998 8.250% -
0.00% Other Notes n 0 v NA NA 0.000% 0 NA
--------
$286,958
PFRD STOCK:
- ----------
14.33% Pfd Stock t 4,167 v 1-Aug 1999 14.330% 4,167 1997
12.88% Pfd Stock 0.0% t 30,000 v 15-Feb 2009 12.875% 0
0.00% n 0 0.000%
--------
$ 34,167
--------
Total Petro $321,125
--------
STAR INSTRUMENTS:
- --------------------------------
8.04% 1st Mortgage Notes 0.07 n 85,000 v NA NA 8.040% - 0
7.25% WC Revolver 0.00 n 4,785 NA NA 7.250% - NA
7.25% Acquisition Facility 0.01 n 9,000 v NA NA 7.250% - NA
9.00% New Debt n 120,000 v NA NA 9.000% 0 NA
7.17% Pearl Notes 0.01 n 11,000 NA NA 7.170% 0 NA
--------
8.21% $218,785
--------
Total Combined $539,910
========
<CAPTION>
% RED./ RED/EXCHG DEFEASANCE RED/EXCHG/DEFEASE EXCHNAGED
PETRO INSTRUMENTS: EXCHANGED PRICE PRICE ----------------- ---------
- ----------------- --------- --------- ---------- VALUE PREMIUM INT RATE SECURITY TYPE
------ ------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
11.96% Sr Notes 100.0% 105.2% $63,126 $ 0 9.0% Sr Notes
14.10% Sr Notes 100.0% 105.2% 3,260 - 11.5% Sr Notes
14.10% Sub Notes 100.0% 105.2% 3,260 - 11.5% Sub Notes
10.13% Sub Notes & Sr Notes 100.0% 100.0% 106.2% 50,000 - Sub Notes & Sr Notes
9.38% Sub Notes & Sr Notes 100.0% 100.0% 108.2% 75,000 - Sub Notes & Sr Notes
12.25% Sub Notes & Sr Notes 100.0% 103.5% 116.2% 84,094 2,844 Sub Notes & Sr Notes
8.00% Acq. & Other Notes Pay 0.0% 100.0% - - Acq. & Other Notes Pay
8.25% Existing Credit Facility 0.0% 100.0% - - Existing Credit Facility
0.00% Other Notes 0.0% 0.0% - - 11.0% Other Notes
--------
$ 2,844
PFRD STOCK:
- ----------
14.33% Pfd Stock 100.0% 100.0% 4,167 - Pfd Stock
12.88% Pfd Stock 100.0% 92.0% 27,600 - Pfd Stock
0.00% - -
--------
$ 0
--------
Total Petro $ 2,844
--------
STAR INSTRUMENTS:
- --------------------------------
8.04% 1st Mortgage Notes 0.0% 0.0% - - 1st Mortgage Notes
7.25% WC Revolver 0.0% 0.0% - - WC Revolver
7.25% Acquisition Facility 0.0% 0.0% - - Acquisition Facility
9.00% New Debt 0.0% 0.0% - - New Debt
7.17% Pearl Notes 0.0% 0.0% - - Pearl Notes
--------
$ 0
--------
Total Combined $ 2,844
--------
2,843.75
</TABLE>
STAR STAND ALONE DISTRIBUTION ASSUMPTIONS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Distribution
------------
<S> <C>
Minimum Quarterly Distributions $2.20
First Target Distribution $2.42
Second Target Distribution $2.84
Third Target Distribution $3.70
Thereafter NM
Target Distribution Level $2.20
Annual Distribution Increase $0.00
------
Standard Distribution Structure ("S") or Target ("T") t
------
- -----------------------------------------------------------------------------------
</TABLE>
STAR PRO FORMA DISTRIBUTION ASSUMPTIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Distribution
------------
<S> <C>
Minimum Quarterly Distribution $2.30
First Target Distribution $2.42
Second Target Distribution $2.84
Third Target Distribution $3.70
Thereafter NM
1998 1999 2000 2001 2002 Thereafter
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Annual Indicated Distribution Increase $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Target Indicated Distribution Level $2.30 $2.30 $2.30 $2.30 $2.30
-------------
Standard Distribution Structure ("S") or Target ("T") t
--------------
- --------------------------------------------------------------------------------
</TABLE>
Main Model Oct.8 Rev 2 with new Star & AGE 15 yr Petro Projections and
tax effect. For discussion purposes only.
4 of 19
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
PRO FORMA OPENING BALANCE SHEET
(in thousands except per share and per unit data) 15-yr; $30mm @ 4.75x mid-year; $0.1 '99, $.005 '00-'01, flat att.
OPENING BALANCE SHEET STAR GAS PETRO PRO FORMA
------------ ----------
------------ ---------- MERGER STAR GAS
9/30/98 9/30/98 ADJUSTMENTS 9/30/98
------------ ---------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS:
-----------
Cash $500 $9,642 $0 $10,142
-----------
Other Current Assets 15,376 71,498 - 86,874
------------ ---------- ----------- ----------
Total Current Assets 15,876 81,140 - 97,016
PP&E and Intangibles, Net 161,292 106,695 - 267,987
Investments in Unconsolidated Affiliates - 1,582 (1,582) -
Other Assets - 12,802 - 12,802
------------ ---------- ----------- ----------
Total Assets 177,168 202,219 (1,582) 377,805
============ ========== ==========
LIABILITIES:
Current Liabilities 10,101 80,870 - 90,971
8.25% Existing Credit Facility 4,785 - - 4,785
Long Term Debt 105,000 286,958 (82,804) 309,154
Total Preferred Stock - 34,167 (34,167) -
Other Liabilities 76 10,710 - 10,786
------------ ---------- ----------- ----------
Total Liabilities 119,962 412,705 (116,971) 415,696
Common Shareholder's/Partner's Equity 57,206 (210,486) 115,389 (37,891)
------------ ---------- ----------- ----------
Total Liabilities and Equity $177,168 $202,219 ($1,582) $377,805
============ ========== =========== ==========
check 0 - - -
<CAPTION>
PRO FORMA CAPITAL STRUCTURE STAR GAS PETRO
------------ ----------
------------ ---------- % NOT MERGER STAR GAS
9/30/98 9/30/98 TENDERED ADJUSTMENTS 9/30/98
------------ ---------- ---------- ----------- --------
<S>
DEBT:
8.04% 1st Mortgage Notes $85,000 $0 $0 $85,000
7.25% WC Revolver 4,785 - - 4,785
7.25% Acquisition Facility 9,000 - - 9,000
7.17% Pearl Notes 11,000 - - 11,000
11.96% Sr Notes - 60,000 100.0% (60,000) -
14.10% Sr Notes - 3,100 100.0% (3,100) -
14.10% Sub Notes - 3,100 100.0% (3,100) -
10.13% Sub Notes & Sr Notes - 50,000 100.0% (50,000) -
9.38% Sub Notes & Sr Notes - 75,000 100.0% (75,000) -
12.25% Sub Notes & Sr Notes - 81,250 100.0% (81,250) -
0.00% Other Notes - 0 - -
8.00% Acq. & Other Notes Pay - 14,508 - 14,508
8.25% Existing Credit Facility - 0 - -
9.00% Exchanged Debt - - 63,126 63,126
11.50% Exchanged Debt 6,520 6,520
9.00% New Debt - - 120,000 120,000
Total L.T. Debt ------------ ---------- ----------- --------
109,785 286,958 (82,804) 313,939
------------ ---------- --------
PREFERRED STOCK:
14.33% Pfd Stock - 4,167 (4,167) -
12.88% Pfd Stock - 30,000 (30,000) -
------------ ---------- ----------- --------
Total Preferred - 34,167 (34,167) -
------------ ---------- --------
Common Equity 57,206 (210,486) 115,389 (37,891)
------------ ---------- --------
$166,991 $ 110,639 $276,048
============ ========== ========
Total Capital
</TABLE>
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections and tax
effect. For discussion purposes only.
5 of 19
<PAGE>
================================================================================
(in thousands except per share and per unit data)
<TABLE>
<CAPTION>
15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005 '00-01, flat att.
STAR GAS STAND ALONE INCOME STATEMENT
ESTIMATED NORMALIZED PROJECTED
----------------------------------------------
1998 1998 1999 2000 2001 2002
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EBITDA $18,781 $20,731 $23,032 $24,465 $25,898 $27,331
Depreciation and Amortization 11,927 11,649 12,358 13,343 14,217 14,927
------- ------- ------- ------- ------- -------
EBIT 6,854 9,082 10,674 11,122 11,681 12,404
Interest Expense (7,922) (7,662) (8,574) (8,884) (9,351) (9,819)
Interest Income - - - - - -
Other Income - - - - - -
------- ------- ------- ------- ------- -------
Income Before Taxes (1,068) 1,420 2,100 2,238 2,330 2,585
Current Income Taxes (25) (25) (25) (25) (25) (25)
Deferred Income Taxes - - - - - -
------- ------- ------- ------- ------- -------
Net Income Available to Common ($1,093) $ 1,395 $ 2,075 $ 2,213 $ 2,305 $ 2,560
======= ======= ======= ======= ======= =======
STAR GAS STAND ALONE UNITS OUTSTANDING
Common Units
Beginning Balance 3,832 3,832 3,858 4,356 4,652 4,936
Issuance 27 27 498 296 284 271
Buyback 0 0 0 0 0 0
------- ------- ------- ------- ------- -------
Ending Balance 3,858 3,858 4,356 4,652 4,936 5,207
------- ------- ------- ------- ------- -------
Average Common Units Outstanding 3,858 3,858 4,107 4,504 4,794 5,071
Subordinated Units
Beginning Balance 2,396 2,396 2,396 2,396 2,396 2,396
Issuance 0 0 0 0 0 0
Buyback 0 0 0 0 0 0
------- ------- ------- ------- ------- -------
Ending Balance 2,396 2,396 2,396 2,396 2,396 2,396
------- ------- ------- ------- ------- -------
Average Subordinated Units Outstanding 2,396 2,396 2,396 2,396 2,396 2,396
GP Implied Units
Beginning Balance 127 127 128 138 144 150
Issuance 1 1 10 6 6 6
Buyback 0 0 0 0 0 0
------- ------- ------- ------- ------- -------
Ending Balance 128 128 138 144 150 155
------- ------- ------- ------- ------- -------
Average Implied GP Units Outstanding 128 128 133 141 147 152
Total Units 6,382 6,382 6,890 7,192 7,481 7,758
======= ======= ======= ======= ======= =======
Average Units Outstanding 6,382 6,382 6,636 7,041 7,337 7,620
======= ======= ======= ======= ======= =======
</TABLE>
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections and tax
effect. For discussion purposes only.
6 of 19
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
(in thousands except per share and per unit data) 15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005'00-'01, flat att.
ESTIMATED PROJECTED
-----------------------------------------
STAR GAS STAND ALONE BALANCE SHEET 1998 1999 2000 2001 2002
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
ASSETS:
Cash
Other Current Assets $ 500 $ 500 $ 500 $ 500 $ 500
Total Current Assets 15,376 17,662 18,433 19,204 19,974
--------- -------- -------- -------- --------
15,876 18,162 18,933 19,704 20,474
PP&E and Intangibles, Net 161,292 162,041 161,853 160,839 159,165
Other Assets - - - - -
--------- -------- -------- -------- --------
Total Assets 177,168 180,203 180,786 180,543 179,639
========= ======== ======== ======== ========
LIABILITIES:
Current Liabilities - Excluding Working Capital Borrowings 10,101 12,387 13,158 13,929 14,699
Total Debt 109,785 111,890 118,337 124,783 131,231
Other Liabilities 76 76 76 76 76
--------- -------- -------- -------- --------
Total Liabilities 119,962 124,353 131,571 138,788 146,007
Partner's Equity 57,206 55,850 49,215 41,755 33,633
--------- -------- -------- -------- --------
Total Liabilities and Equity $ 177,168 $180,203 $180,786 $180,543 $179,639
========= ======== ======== ======== ========
Check 0 0 0 0 0
STAR GAS STAND ALONE CASH FLOW STATEMENT
Net Income $ 2,075 $ 2,213 $ 2,305 $ 2,560
Depreciation and Amortization 12,358 13,343 14,217 14,927
Deferred Taxes - - - -
Other Income - - - -
Other Assets/Liabilities - - - -
Change in Working Capital (0) 0 - -
-------- -------- -------- --------
Cash from Operations 14,433 15,556 16,522 17,487
-------- -------- -------- --------
Maintenance CapEx (2,657) (2,705) (2,753) (2,803)
Internal Growth CapEx - - - -
External Growth CapEx (10,000) (10,000) (10,000) (10,000)
-------- -------- -------- --------
Cash from Investments (12,657) (12,705) (12,753) (12,803)
-------- -------- -------- --------
Acquisition Borrowing (1,169) 3,359 3,625 3,918
Remaining Distributions to Repay Debt 0 (0) 0 (0)
Amortization of Mortgage Notes - - - -
Borrowing to Repay Existing Debt - - - -
Borrowing for Changes in WC 0 (0) - -
Borrowing to Pay Full MQD 2,824 2,638 2,371 2,080
Change in Equity 11,169 6,641 6,375 6,082
Transaction/Deal Expenses (450) (450) (450) (450)
Distributions (14,599) (15,490) (16,141) (16,763)
-------- -------- -------- --------
Cash from Financing (2,226) (3,301) (4,219) (5,134)
-------- -------- -------- --------
Net Cash Flow (450) (450) (450) (450)
Initial Cash Balance 500 500 500 500
-------- -------- -------- --------
Cash Available for Paydown on WC Revolver and Acq. Facility 50 50 50 50
Minimum Cash Balance 500 500 500 500
Borrowing/(Paydown) on WC Revolver and Acq. Facility 450 450 450 450
-------- -------- -------- --------
Net Change in Cash - - - -
-------- -------- -------- --------
Ending Cash Balance $ 500 $ 500 $ 500 $ 500
======== ======== ======== ========
</TABLE>
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections and tax
effect. For discussion purposes only.
7 of 19
<PAGE>
<TABLE>
<CAPTION>
===============================================================================================================================
(in thousands except per share and per unit data)
15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01, flat att.
ESTIMATED NORMALIZED PROJECTED
------------------------------------------
1998 1998 1999 2000 2001 2002
--------- ---------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
STAR GAS STAND ALONE EBITDA CALCULATION
(See Tab 3: Cases)
- -------------------------------------------------------------------------------------------------------------------------------
Year 1 Year 2 Year 3 Year 4 Year 5
EBITDA Growth Rate 10.4% 11.1% 6.2% 5.9% 5.5%
- -------------------------------------------------------------------------------------------------------------------------------
Base EBITDA: Timing
------
End 1998
Mid 1999
Mid 2000
Mid 2001
Mid 2002
Mid 2003
Mid 2004
Mid 2005
--------- --------- -------- -------- --------- --------
Total EBITDA $18,781 $20,731 $23,032 $24,465 $25,898 $27,331
========= ========= ======== ======== ========= ========
Pro Forma Full-Year EBITDA for Debt Covenant Analysis 18,781 20,731 23,748 25,181 26,614 28,047
STAR GAS STAND ALONE DEPRECIATION CALCULATION
Existing Depreciation $11,927 $11,649 $11,649 $11,649 $11,649 $11,649
1998 Normal 2,710
Maintenance CapEx: 1998 2,710 $ 0 $ 0 $ 181 $ 181 $ 181 $ 181
Annual Growth: 1.8% 1999 2,657 89 177 177 177
2000 2,705 90 180 180
2001 2,753 92 184
2002 2,803 93
Internal Growth CapEx: 1998 0 - - - - - -
Annual Growth: 0.0% 1999 0 - - - -
2000 0 - 0 0
2001 0 - 0
2002 0 -
2003 0
2004 0
2005 0
External Growth CapEx: 1998 10,000 - - 667 667 667 667
Annual Growth: 0.0% 1999 10,000 333 667 667 667
2000 10,000 333 667 667
2001 10,000 333 667
2002 10,000 333
2003 10,000
2004 10,000
2005 10,000
--------- --------- -------- -------- --------- --------
Total Depreciation: $11,927 $11,649 $12,358 $13,343 $14,217 $14,927
========= ========= ======== ======== ========= ========
</TABLE>
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections and tax
effect. For discussion purposes only.
8 of 19
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================================
STAR GAS STAND ALONE DEBT SCHEDULE
(in thousands except per share and per unit data)
15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01, flat att.
ESTIMATED NORMALIZED PROJECTED
--------------------------------------------------
1998 1998 1999 2000 2001 2002
--------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
8.04% 1st Mortgage Notes
Beginning Balance $ 85,000 $ 85,000 $ 85,000 $ 85,000 $ 85,000 $ 85,000
Borrowing 0 0 0 0 0 0
Amortization 0 0 0 0 0 0
-------- -------- -------- -------- -------- --------
Ending Balance 85,000 85,000 85,000 85,000 85,000 85,000
Interest Payment 8.04% 6,834 6,834 6,834 6,834 6,834 6,834
Make-Whole Payment 0 0 0 0 0 0
7.17% Pearl Notes
Beginning Balance $ 0 $ 0 $ 11,000 $ 11,000 $ 11,000 $ 11,000
Borrowing 11,000 11,000 0 0 0 0
Amortization 0 0 0 0 0 0
-------- -------- -------- -------- -------- --------
Ending Balance 11,000 11,000 11,000 11,000 11,000 11,000
Interest Payment 7.17% 613 613 789 789 789 789
% of year Pearl Notes Outstanding 77.7% 77.7% 0 0 0 0
7.25% WC Revolver
Beginning Balance - - $ 4,785 $ 4,785 $ 4,785 $ 4,785
Borrowing for Change in WC - - 0 (0) - -
Borrowing/(Payment) 4,785 4,785 0 0 0 0
-------- -------- -------- -------- -------- --------
Ending Balance 4,785 4,785 4,785 4,785 4,785 4,785
Effective Avg WC Balance 3,490 (97) 14 0 0 14
Interest Payment 7.25% 253 (7) 1 0 0 1
7.25% Acquisition Facility
Beginning Balance - - $ 9,000 $ 11,105 $ 17,552 $ 23,998
External Acquisitions 9,400 9,400 (1,169) 3,359 3,625 3,918
External Acquisitions at
Beginning of 1999 - - - - - -
Internal Acquisitions (400) (400) - - - -
Borrowing to Pay Full MQD - - 2,824 2,638 2,371 2,080
Borrowings to Repay Existing Debt - - - - - -
Borrowings/(Payment) - - 450 450 450 450
Remaining Distributions to Repay Debt - - 0 (0) 0 (0)
-------- -------- -------- -------- -------- --------
Ending Balance 9,000 9,000 11,105 17,552 23,998 30,446
Interest Payment 7.25% 0 0 729 1,039 1,506 1,974
TOTAL DEBT
Beginning Balance $ 85,000 $ 85,000 $109,785 $111,890 $118,337 $124,783
Amortization of Mortgage Notes - - - - - -
Borrowing for Pearl Notes 11,000 11,000 - - - -
Borrowing for Changes in WC - - 0 (0) - -
Borrowing to Pay Full MQD - - 2,824 2,638 2,371 2,080
Acquisition Borrowing 9,000 9,000 (1,169) 3,359 3,625 3,918
Borrowing to Repay Existing Debt - - - - - -
Remaining Distributions to Repay Debt - - 0 (0) 0 (0)
Borrowing/Payment on WC Revolver and
Acq. Facility 4,785 4,785 450 450 450 450
-------- -------- -------- -------- -------- --------
Ending Balance $109,785 $109,785 $111,890 $118,337 $124,783 $131,231
======== ======== ======== ======== ======== ========
INTEREST EXPENSE
Interest Expense $ 7,700 $ 7,440 $ 8,352 $ 8,662 $ 9,129 $ 9,597
Bank Fee 222 222 222 222 222 222
-------- -------- -------- -------- -------- --------
Total Interest Payment $ 7,922 $ 7,662 $ 8,574 $ 8,884 $ 9,351 $ 9,819
======== ======== ======== ======== ======== ========
</TABLE>
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections and tax
effect. For discussion purposes only.
9 of 19
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
STAR GAS STAND ALONE SCHEDULE OF ACTUAL DISTRIBUTIONS 15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01, flat att.
(in thousands except per share and per unit data)
ESTIMATED NORMALIZED PROJECTED
-----------------------------------------
ASSUMES REVISED TARGET DISTRIBUTIONS STRUCTURE 1998 1998 1999 2000 2001 2002
-------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Distributable Cash
- ------------------
Cash from Operations $ 10,834 $ 13,044 $ 14,433 $ 15,556 $ 16,522 $ 17,487
Maintenance CapEx (2,710) (2,710) (2,657) (2,705) (2,753) (2,803)
Other 0 0 0 0 0 0
-------- --------- -------- -------- -------- --------
Total MLP Distributable Cash Flow 8,124 10,334 11,776 12,851 13,769 14,684
Distributable Cash Flow/Unit $ 1.27 $ 1.62 $ 1.77 $ 1.83 $ 1.88 $ 1.93
Average Units for Calculating Annual Distributions 2 2 2 2
- --------------------------------------------------
Common Units 3,858 3,858 4,107 4,504 4,794 5,071
Subordinated Units 2,396 2,396 2,396 2,396 2,396 2,396
General Partner Interest Unit Equivalent 128 128 133 141 147 152
-------- --------- -------- -------- -------- --------
Total Units Outstanding 6,382 6,382 6,636 7,041 7,337 7,620
Distribution Levels
- -------------------
MQD $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20
First Target $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42
Second Target $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84
Third Target $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70
Indicated Cash Distribution $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20
Distribution of MQD
- -------------------
Cash Available 8,124 10,334 11,776 12,851 13,769 14,684
Cash Borrowed to Pay Full MQD 5,917 3,707 2,824 2,638 2,371 2,080
Allocation to:
Common Units 8,489 8,489 9,036 9,909 10,546 11,157
Subordinated Units 5,271 5,271 5,271 5,271 5,271 5,271
General Partner Interest 281 281 292 310 323 335
First Target Distribution
- -------------------------
Cash Available 0 0 0 0 0 0
Cash Required for Target Distribution 0 0 0 0 0 0
Cash Required for Indicated Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Second Target Distribution
- --------------------------
Cash Available 0 0 0 0 0 0
Cash Required for Target Distribution 0 0 0 0 0 0
Cash Required for Indicated Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Incentive Distribution 0 0 0 0 0 0
</TABLE>
Main Model Oct-8 rev 2 with new Star & AGE 15yr Petro Projections and
tax effect. For discussion purposes only.
10 of 19
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
STAR GAS STAND ALONE SCHEDULE OF ACTUAL DISTRIBUTIONS (CONT'D) 15-yr; 30 mm @ 4.75x mid-year ; $ 0.1 '99, $.005 '00.01, flat att
(in thousands except per share and per unit data)
ESTIMATED NORMALIZED PROJECTED
-------------------------------------------
1998 1998 1999 2000 2001 2002
------------ ---------- ------------ -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
REMAINING DISTRIBUTION
- ----------------------
Cash Available 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Incentive Distribution 0 0 0 0 0 0
Repay Indebtedness (0) (0) (0) 0 (0) 0
TOTAL DISTRIBUTIONS
- -------------------
Common Units 8,489 8,489 9,036 9,909 10,546 11,157
Subordinated Units 5,271 5,271 5,271 5,271 5,271 5,271
General Partner Interest 281 281 292 310 323 335
Incentive Distribution 0 0 0 0 0 0
------------ ---------- ------------ -------- --------- ----------
Total Distributions $14,041 $14,041 $14,599 $15,490 $16,141 $16,763
============ ========== ============ ======== ========= ==========
TOTAL DISTRIBITION PER UNIT
- ---------------------------
Common Unit $2.20 $2.20 $2.20 $2.20 $2.20 $2.20
Subordinated Unit 2.20 2.20 2.20 2.20 2.20 2.20
GP Unit 2.20 2.20 2.20 2.20 2.20 2.20
</TABLE>
Main Model Oct-8 Rev 2 with new Star & AGE 15yr Petro Projections and tax
effect. For discussion purposes only.
11 of 19
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
(in thousands except per share and per unit data)
15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01, flat att.
Estimated Normalized Projected
-------------------------------------------------
1998 1998 1999 2000 2001 2002
--------- ---------- ------- --------- ---------- -----------
PETRO EBITDA CALCULATION
- ------------------------------------------------------------------------------------------------------------------------------------
Year 1 Year 2 Year 3 Year 4 Year 5
EBITDA Growth Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Base EBITDA: Timing
------
Acquisitions: End 1998 $ 0
Mid 1999 30,000
Mid 2000 30,000
Mid 2001 30,000
Mid 2002 30,000
Mid 2003 30,000
Mid 2004 30,000
Mid 2005 30,000
-------- -------- -------- -------- -------- --------
Total EBITDA $ 37,630 $ 44,749 $ 46,463 $ 48,897 $ 51,040 $ 52,989
======== ======== ======== ======== ======== ========
Pro Forma Full-Year EBITDA for Debt Covenent Analysis 37,630 44,749 49,534 51,968 54,111 56,060
PETRO DEPRECIATION CALCULATION
Existing Depreciation $ 28,710 $ 28,710 $ 28,710 $ 28,710 $ 28,710 $ 28,710
Maintenance CapEx: 1998 $ 2,776 - - 185 185 185 185
Annual Growth: 2.0% 1999 3,000 100 200 200 200
2000 3,060 102 204 204
2001 3,121 104 208
2002 3,184 108
2003 3,247
2004 3,312
2005 3,378
Internal Growth CapEx: 1998 $ 0 - - - - - -
Annual Growth: 0.0% 1999 0 - - - -
2000 0 - - -
2001 0 - -
2002 0 -
2003 0
2004 0
2005 0
External Growth CapEx: 1998 $ 0 - - 0 0 0 0
Annual Growth: 0.0% 1999 30,000 2,308 4,615 4,615 4,615
2000 30,000 2,308 4,615 4,615
2001 30,000 2,308 4,615
2002 30,000 2,308
2003 30,000
2004 30,000
2005 30,000
-------- -------- -------- -------- -------- --------
Total Depreciation 28,710 28,710 31,303 36,120 40,942 45,767
======== ======== ======== ======== ======== ========
</TABLE>
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections and tax
effect. For discussion purposes only.
12 of 19
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================================
(in thousands except per share and per unit data)
15-YR; $30MM @ 4.75X MID-YEAR; $.01 '99, $.005 '00-'01, FLAT ATT.
STAR PRO FORMA INCOME STATEMENT
ESTIMATED NORMALIZED PROJECTED
------------------------------------------
1998 1998 1999 2000 2001 2002
--------- ---------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Combined EBITDA $56,411 $65,480 $69,495 $73,362 $76,938 $80,320
Consolidated Savings 500 500 500 500 500 500
--------- ---------- -------- -------- --------- --------
Pro Forma EBITDA 56,911 65,980 69,995 73,862 77,438 80,820
Depreciation and Amortization 40,637 40,359 43,661 49,463 55,159 60,694
--------- ---------- -------- -------- --------- --------
EBIT 16,274 25,621 26,334 24,399 22,279 20,126
Interest Expense (28,307) (28,307) (29,004) (30,429) (31,685) (32,820)
Interest Income - - - - - -
Other Income - - - - - -
EBT (12,033) (2,686) (2,669) (6,031) (9,045) (12,694)
--------- ---------- -------- -------- --------- --------
Current Income Taxes (1,025) (1,025) (1,025) (1,025) (1,025) (1,025)
Deferred Income Taxes - - - - - -
--------- ---------- -------- -------- --------- --------
Net Income Available to Common ($13,058) ($3,711) ($3,694) ($7,056) ($10,430) ($13,719)
========= ========== ======== ======== ========= ========
Pro Forma Full-Year EBITDA for Debt Covenant Analysis 56,911 65,980 73,782 77,649 81,225 84,607
STAR PRO FORMA UNITS OUTSTANDING
Common Units - -
Beginning Balance 10,842 10,842 11,614 12,621 13,696
Issuance - - - - -
Issued to Meet Debt Covenant Ratio - 772 1,007 1,075 1,126
Issued to E - - - - -
Buyback - - - - -
--------- ---------- -------- -------- --------- --------
Ending Balance 10,842 10,842 11,614 12,621 13,696 14,822
--------- ---------- -------- -------- --------- --------
Average Common Units Outstanding 10,842 10,842 11,228 12,117 13,158 14,259
Deferred Participation Units -
Beginning Balance - - 909 909 909 909
DPUs Issued at Beginning of Year - - - - - -
--------- ---------- -------- -------- --------- --------
Ending Balance - - 909 909 909 909
SR Subordinated Units
Beginning Balances - Sr Sub Units 2,767 2,767 2,767 2,767 2,767
DPUs Issued - - - - -
Sr Sub Issuance - - - - -
Sr Sub to E - - - - -
Sr Sub Converted to G.P. Interest - - - - -
--------- ---------- -------- -------- --------- --------
Ending Balance 2,767 2,767 2,767 2,767 2,767 2,767
--------- ---------- -------- -------- --------- --------
Average Sr Subordinated Units Outstanding 2,767 2,767 2,767 2,767 2,767 2,767
Subordinated Units
Beginning Balance 567 567 567 567 567
Issuance - - - - -
Buyback - - - - -
--------- ---------- -------- -------- --------- --------
Ending Balance 567 567 567 567 567 567
--------- ---------- -------- -------- --------- --------
Average Subordinated Units Outstanding 567 567 567 567 567 567
GP Implied Units
Beginning Balance 289 289 289 289 289
Issued in conjuction with DPUs - - - - -
Issued to Meet Debt Covenant Ratio - - - - -
Issued in conjuction with E Equity - - - - -
Buyback - - - - -
--------- ---------- -------- -------- --------- --------
289 289 289 289 289 289
--------- ---------- -------- -------- --------- --------
Average Implied GP Units Outstanding 289 289 289 289 289 289
Total Units Outstanding 14,465 14,465 15,237 16,245 17,320 18,446
--------- ---------- -------- -------- --------- --------
Average Total Units Outstanding 14,465 14,465 14,851 15,741 16,782 17,883
========= ========== ======== ======== ========= ========
Pro Forma Heating Oil Units Used for DPU
Issue Calculation 8,215 8,700 9,446 10,263
</TABLE>
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections and
tax effect. For discussion purposes only.
13 of 19
<PAGE>
<TABLE>
<CAPTION>
================================================================================
(in thousands except per share and per unit data)
15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01, flat att.
ESTIMATED PROJECTED
------------------------------------------------------
STAR PRO FORMA BALANCE SHEET 1998 1999 2000 2001 2002
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Cash $ 10,142 $ 10,142 $ 10,142 $ 10,142 $ 10,142
Other Current Assets 86,874 92,410 97,741 102,672 107,335
----------- ------------ ------------ ------------ ------------
Total Current Assets 97,016 102,552 107,883 112,814 117,477
PP&E and Intangibles, Net 267,987 269,983 266,285 257,001 242,293
Other Assets 12,802 12,802 12,802 12,802 12,802
----------- ------------ ------------ ------------ ------------
Total Assets 377,805 385,337 386,971 382,617 372,572
=========== ============ ============ ============ ============
LIABILITIES:
Current Liabilities 90,971 96,507 101,838 106,769 111,432
8.25% Existing Credit Facility 4,785 4,785 4,785 4,785 4,785
Total LT Debt 309,154 332,019 349,421 365,513 380,732
Other Liabilities 10,786 10,786 10,786 10,786 10,786
----------- ------------ ------------ ------------ ------------
Total Liabilities 415,696 444,097 466,830 487,852 507,734
Preferred Stock - - - - -
Common Shareholder's Equity (37,891) (58,760) (79,859) (105,236) (135,162)
----------- ------------ ------------ ------------ ------------
Total Liabilities and Equity $377,805 $385,337 $386,971 $ 382,617 $ 372,572
=========== ============ ============ ============ ============
Check - - - 0 0
STAR PRO FORMA CASH FLOW STATEMENT
Net Income ($3,694) ($7,056) ($10,430) ($13,719)
Depreciation and Amortization 43,661 49,463 55,159 60,694
Deferred Taxes - - - -
Other Assets/Liab - - - -
Change in Non-Cash Working Capital - - - -
------------ ------------ ------------ ------------
Cash from Operations 39,966 42,408 44,728 46,975
Maintenance CapEx (5,657) (5,765) (5,874) (5,987)
Internal Growth CapEx - - - -
External Growth CapEx (40,000) (40,000) (40,000) (40,000)
------------ ------------ ------------ ------------
Cash from Investments (45,657) (45,765) (45,874) (45,987)
Acquisition Borrowing 40,000 40,000 40,000 40,000
Remaining Distributions to Repay Debt (151) (438) (255) (0)
Amortization of Existing Debt (6,127) (8,141) (60) (60)
Borrowing to Repay Existing Debt 6,127 8,141 60 60
Borrowing for Changes in WC - - - -
Change in Common Equity & GP Interest 16,984 22,160 23,653 24,781
Repayment of Preferred Stock - - - -
Distributions (34,158) (36,204) (38,599) (40,988)
------------ ------------ ------------ ------------
Cash from Financing 22,675 25,518 24,799 23,793
Net Cash Flow 16,984 22,160 23,653 24,781
Initial Cash Balance 10,142 10,142 10,142 10,142
------------ ------------ ------------ ------------
Cash Available for Paydown on WC Revolver and Acq. Facility 27,126 32,302 33,795 34,923
Minimum Cash Balance 10,142 10,142 10,142 10,142
Borrowing/(Paydown) on WC Revolver and Acq. Facility (16,984) (22,160) (23,653) (24,781)
------------ ------------ ------------ ------------
Ending Cash Balance 10,142 10,142 10,142 10,142
Net Change in Cash $ 0 ($0) ($0) $ 0
============ ============ ============ ============
</TABLE>
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections and tax
effect. For discussion purposes only.
14 of 19
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
(in thousands except per share and per unit data)
15-YR; $30MM @ 4.75X MID-YEAR; $.01 '99, $.005 '00-'01, FLAT ATT.
ESTIMATED NORMALIZED PROJECTED
----------------------------------------------
STAR PRO FORMA DEBT SCHEDULE 1998 1998 1999 2000 2001 2002
--------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
8.04% 1st Mortgage Notes
Beginning Balance $ 85,000 $ 85,000 $ 85,000 $ 85,000 $ 85,000 $ 85,000
Borrowing - - - - - -
Amortization - - - - - -
--------- --------- --------- --------- --------- --------
Ending Balance 85,000 85,000 85,000 85,000 85,000 85,000
Interest Payment 8.04% 6,834 6,834 6,834 6,834 6,834 6,834
7.17% Pearl Notes
Beginning Balance 11,000 11,000 11,000 11,000 11,000 11,000
Borrowing - - - - - -
Amortization - - - - - -
--------- --------- --------- --------- --------- --------
Ending Balance 11,000 11,000 11,000 11,000 11,000 11,000
Interest Payment 7.17% 613 613 789 789 789 789
% of year Pearl Notes Outstanding 77.7% 77.7%
10.13% Sub Notes & Sr Notes
Beginning Balance 50,000 50,000 - - - -
Borrowing - - - - - -
Amortization (50,000) (50,000) - - - -
--------- --------- --------- --------- --------- --------
Ending Balance - - - - - -
Interest Payment 10.13% - - - - - -
9.38% Sub Notes $ Sr Notes
Beginning Balance 75,000 75,000 - - - -
Borrowing - - - - - -
Amortization (75,000) (75,000) - - - -
--------- --------- --------- --------- --------- --------
Ending Balance - - - - - -
Interest Payment 9.38% - - - - - -
12.25% Sub Notes & Sr Notes
Beginning Balance 81,250 81,250 - - - -
Borrowing - - - - - -
Amortization (81,250) (81,250) - - - -
--------- --------- --------- --------- --------- --------
Ending Balance - - - - - -
Interest Payment 12.25% - - - - - -
9.00% New Debt
Beginning Balance - - 120,000 126,127 134,268 134,328
Borrowing 120,000 120,000 6,127 8,141 60 60
Amortization - - - - - -
--------- --------- --------- --------- --------- --------
Ending Balance 120,000 120,000 126,127 134,268 134,328 134,388
Interest Payment 9.00% 10,800 10,800 11,076 11,718 12,087 12,092
Exchange of 11.96% Senior Notes
Beginning Balance - - 63,126 63,126 63,126 63,126
Borrowing 63,126 63,126 - - - -
Amortization - - - - - -
--------- --------- --------- --------- --------- --------
Ending Balance 63,126 63,126 63,126 63,126 63,126 63,126
Interest Payment 9.00% 5,681 5,681 5,681 5,681 5,681 5,681
8.00% Acq. & Other Notes Pay
Beginning Balance 16,507 16,507 14,508 8,381 240 180
Borrowing - - - - - -
Amortization (1,999) (1,999) (6,127) (8,141) (60) (60)
--------- --------- --------- --------- --------- --------
Ending Balance 14,508 14,508 8,381 240 180 120
Interest Payment 8.00% 1,241 1,241 916 345 17 12
</TABLE>
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections and
tax effect. For discussion purposes only.
15 of 19
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================================
(in thousands except per share and per unit data)
15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01, flat att.
ESTIMATED NORMALIZED PROJECTED
-------------------------------------------
STAR PRO FORMA DEBT SCHEDULE (CONT'D) 1998 1998 1999 2000 2001 2002
--------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Exchange of 14.10% Senior Notes
Beginning Balance - - 6,520 6,520 6,520 6,520
Borrowing 6,520 6,520 - - - -
Amortization - - - - - -
--------- ---------- --------- --------- --------- ---------
Ending Balance 6,520 6,520 6,520 6,520 6,520 6,520
Interest Payment 11.50% 750 750 750 750 750 750
7.25% WC Revolver
Beginning Balance - - 4,785 4,785 4,785 4,785
Borrowing for Change in WC - - - - - -
Borrowing to Pay full MQD - - - - - -
Borrowing/(Payment) 4,785 4,785 - - - -
--------- ---------- --------- --------- --------- ---------
Ending Balance 4,785 4,785 4,785 4,785 4,785 4,785
Effective Avg WC Balance 23,600 23,600 10,828 9,379 9,379 9,379
Interest Payment 7.25% 1,711 1,711 785 680 680 680
7.25% Acquisition Facility
Beginning Balance - - 9,000 31,865 49,266 65,358
External Acquisitions 9,400 9,400 40,000 40,000 40,000 40,000
External Acquisitions at Beginning of 1999 - - - - - -
Internal Growth CapEx (400) (400) - - - -
Payment - - (16,984) (22,160) (23,653) (24,781)
Remaining Distributions to Repay Debt - - (151) (438) (255) (0)
--------- ---------- --------- --------- --------- ---------
Ending Balance 9,000 9,000 31,865 49,266 65,358 80,577
Interest Payment 7.25% ($15) ($15) $ 1,481 $ 2,941 $ 4,155 $ 5,290
Total Pro Forma Debt
Beginning Balance $ 318,757 $ 318,757 $ 313,939 $ 336,804 $ 354,206 $ 370,298
Amortization of Existing Debt (208,249) (208,249) (6,127) (8,141) (60) (60)
Exchange of Notes 69,646 69,646 - - - -
Borrowing for Changes in WC - - - - - -
Acquisition Borrowing 9,000 9,000 40,000 40,000 40,000 40,000
Borrowing to Pay Full MQD - - - - - -
Borrowing to Repay Existing Debt 120,000 120,000 6,127 8,141 60 60
Remaining Distribution to Repay Debt - - (151) (438) (255) (0)
Borrowing/(Payment) on WC Revolver and Acq. Facility 4,785 4,785 (16,984) (22,160) (23,653) (24,781)
--------- ---------- --------- --------- --------- ---------
Ending Balance 313,939 313,939 336,804 354,206 370,298 385,517
Preferred Stock
Beginning Balance 34,167 34,167 - - - -
Repayment (34,167) (34,167) - - - -
--------- ---------- --------- --------- --------- ---------
Ending Balance - - - - - -
Dividend Payment 14.33% - - - - - -
Interest Expense/Dividends 27,615 27,615 28,312 29,737 30,993 32,128
Chase Fees 692 692 692 692 692 692
--------- ---------- --------- --------- --------- ---------
Total Interest Payment/Dividends $ 28,307 $ 28,307 $ 29,004 $ 30,429 $ 31,685 $ 32,820
========= ========== ========= ========= ========= =========
</TABLE>
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections
and tax effect. For discussion purposes only.
16 of 19
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(in thousands except per share and per unit data)
15-yr $30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01, flat att.
STAR PRO FORMA DISTRIBUTION SCHEDULE OF ACTUAL DISTRIBUTIONS
Estimated Normalized Projected
-------------------------------------------
1998 1998 1999 2000 2001 2002
--------- ---------- --------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Distributable Cash
- ------------------
Cash from Operations (excl chg in WC) 27,579 36,648 $39,966 $42,408 $44,728 $46,975
Maintenance CapEx (5,486) (5,486) (5,657) (5,765) (5,874) (5,987)
Other - - - - - -
-------- ------- ------- ------- ------- -------
Total MLP Distributable Cash Flow 22,093 31,162 34,309 36,643 38,854 40,988
Distributable Cash Flow / Unit $ 1.53 $ 2.15 $ 2.31 $ 2.33 $ 2.32 $ 2.29
Distributable Cash Flow / Unit Pro Forma for DPU Conversion
Average Units for Calculating Annual Distributions
- --------------------------------------------------
Common Units 10,842 10,842 11,228 12,117 13,158 14,259
SR Subordinated Units 2,767 2,767 2,767 2,767 2,767 2,767
Subordinated Units 567 567 567 567 567 567
General Partner Interest Unit Equivalent 289 289 289 289 289 289
-------- ------- ------- ------- ------- -------
Total Units Outstanding 14,465 14,465 14,851 15,741 16,782 17,883
Distribution Levels $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30
- -------------------
MQD $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30
First Target $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42
Second Target $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84
Third Target $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70
Indicated Cash Distribution $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30
Distribution of MQD
- -------------------
Cash Available 22,093 31,162 34,309 36,643 38,854 40,988
Allocation to:
Common Units 22,093 24,936 25,823 27,869 30,264 32,796
SR Subordinated Units 0 6,226 6,364 6,364 6,364 6,364
Subordinated Units 0 0 1,305 1,305 1,305 1,211
General Partner Interest 0 0 665 665 665 617
First Target Distribution
- -------------------------
Cash Available 0 0 151 438 255 0
Cash Required for Target Distribution 0 0 1,783 1,892 2,020 0
Cash Required for Indicated Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
SR Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Total Distributions to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
</TABLE>
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections and
tax effect . For discussion purposes only.
17 of 19
<PAGE>
================================================================================
(in thousands except per share and per unit data)
<TABLE>
<CAPTION>
STAR GAS PRO FORMA SCHEDULE OF ACTUAL DISTRIBUTIONS (CONT'D) 15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01, flat att
ESTIMATED NORMALIZED PROJECTED
-------------------------------------------------------
1998 1998 1999 2000 2001 2002
--------- ---------- ----------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Second Target Distribution
- --------------------------
Cash Available 0 0 0 0 0 0
Cash Required for Target Distribution 0 0 0 0 0 0
Cash Required for Indicated Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
SR Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Incentive Right 0 0 0 0 0 0
Incentive Right to GP Interest 0 0 0 0 0 0
Incentive Right to Sub Units 0 0 0 0 0 0
Incentive Right to Sr. Sub Units 0 0 0 0 0 0
Total Distributions to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Third Target Distribution
- -------------------------
Cash Available 0 0 0 0 0 0
Cash Required for Target Distribution 0 0 0 0 0 0
Cash Required for Indicated Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Incentive Right 0 0 0 0 0 0
Incentive Right to GP Interest 0 0 0 0 0 0
Incentive Right to Sub Units 0 0 0 0 0 0
Incentive Right to Sr. Sub Units 0 0 0 0 0 0
Total Distributions to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Remaining Distribution
- ----------------------
Cash Available 0 0 0 0 0 0
Cash Required for Indicated Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Incentive Right 0 0 0 0 0 0
Incentive Right to GP Interest 0 0 0 0 0 0
Incentive Right to Sub Units 0 0 0 0 0 0
Incentive Right to Sr. Sub Units 0 0 0 0 0 0
Repay Indebtedness 0 0 151 438 255 0
Total Distributions to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
</TABLE>
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections and
tax effect. For discussion purposes only.
18 of 19
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
(in thousands except per share and per unit data)
STAR GAS PRO FORMA SCHEDULE OF ACTUAL DISTRIBUTIONS (CONT'D) 15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01, flat att.
Estimated Normalized Projected
-------------------------------------------------
1998 1998 1999 2000 2001 2002
----------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total Distributions
- -------------------
Common Units $ 22,093 $ 24,936 $ 25,823 $ 27,869 $ 30,264 $ 32,796
SR Subordinated Units 0 6,226 6,364 6,364 6,364 6,364
Subordinated Units 0 0 1,305 1,305 1,305 1,211
General Partner Interest 0 0 665 665 665 617
--------- --------- --------- --------- --------- ---------
Total Distributions $ 22,093 $ 31,162 $ 34,158 $ 36,204 $ 38,599 $ 40,988
========= ========= ========= ========= ========= =========
14,041 14,041 14,599 15,490 16,141 16,763
Total Distributions Per Unit
- ----------------------------
Common Units $ 2.04 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30
SR Subordinated Units 0.00 2.25 2.30 2.30 2.30 2.30
Subordinated & GP Units 0.00 0.00 2.30 2.30 2.30 2.13
</TABLE>
Main Model Oct-8 Rev 2 with new Star & AGB 15 yr Petra Projections
and tax effect. For discussion purposes only.
19 of 19
<PAGE>
PETRO PRO FORMA WORKING CAPITAL REQUIREMENTS
(IN 000S, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
ASSUMPTIONS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DEBT ATTRIBUTED TO PETRO:
9/30/98
Pro Forma Interest Annual
Balance Rate Interest
--------- ---------- -----------
8.00 % Acquisition & Other Notes Pay $ 14,508 8.00% $ 1,161
9.00 % Exchanged Debt 63,126 9.00% 5,681
11.50 % Exchanged Debt 6,520 11.50% 750
9.25 % New Debt (a) 120,000 9.25% 11,100
-----------
$18,692
NEW COMMON UNITS TO REFINANCE OLD DEBT & CONSENT FEE:
Price Per Number Annual
Amount to be Raised Share of Units MQD Distribution
- --------------------------------------------------- ---------- ----------- -------------------
$141,473 $20.259 6,983 $2.30 $16,061
INCREASE IN MDQ ON OLD COMMON UNITS Number Increase in Annual
of Units MDQ Distribution
---------- ----------- -------------------
Old Common Units 3,832 $0.10 $383
OPERATING WORKING CAPITAL REQUIRE $ 500
TAX LIABILITY: $ 5,000
(a) AGE assumed rate of 9.25%
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
REQUIREMENT CALCULATION
- -----------------------------------------------------------------------------------------------------------------
Closing Date
--------------------------------------------------
Jan 31 Feb 28 Mar 31
1999 1999 1999
-------------- ------------- --------------
<S> <C> <C> <C>
Interest on Debt Attributed to Petro: $17,134 $15,576 $14,019
MDQ on New Common Units 16,061 16,061 16,061
Increase in MDQ on old Common Units 383 383 383
Operating Working Capital Requirement 500 500 500
Tax Liability 5,000 5,000 5,000
----- ----- -----
Sub Total $39,078 $37,521 $35,963
Petro EBITDA
Historical Quarter Ended:
6/30/98 ($6,355) ($6,355) ($6,355)
9/30/97 (20,908) (20,908) (20,908)
12/31/97 16,716 16,716 16,716
------
Projected Month Ended:
2/28/99 20,434
3/31/99 13,281 13,281
------ ------
Sub Total $23,168 $ 2,734 ($10,547)
TOTAL $15,910 $34,787 $46,510
- -----------------------------------------------------------------------------------------------------------------
WORKING CAPITAL REQUIREMENT 18,000 35,000 46,500
- -----------------------------------------------------------------------------------------------------------------
Projected Month Ended Working Capital:
Standard Calculation $20,670 $36,836 $47,341
Excess Cash Assuming a March 31 Close $ 841
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
CONTACT:
Star Gas: Richard F. Ambury
Vice President-Finance
203-328-7313
Robert L. Rinderman
David C. Collins
Jaffoni & Collins Incorporated
212/835-8500 or [email protected]
------------------
Petro: George Leibowitz
Treasurer
203/325-5470
Jim Bottiglieri
Vice President and Controller
203/325-5460
FOR IMMEDIATE RELEASE
STAR GAS PARTNERS, L.P. AND PETROLEUM HEAT AND POWER CO., INC.
ANNOUNCE AGREEMENT IN PRINCIPLE TO COMBINE
STAMFORD, CT (August 14, 1998) - Star Gas Partners, L.P., ("Star" or
the "Partnership") (NYSE:SGU) and Petroleum Heat and Power Co., Inc. ("Petro" or
the "Company") (NASDAQ:HEAT), jointly announced today that they have reached an
agreement in principle to enter into a strategic business combination in which
Petro would become a wholly-owned subsidiary of Star. This transaction would be
effected through Petro shareholders exchanging their approximately 26.6 million
shares of Petro Common Stock for approximately 3.6 million Star master limited
partnership units which will be subordinated to the existing Star Common Units.
Star Gas currently distributes to its partners, on a quarterly basis, all of its
Available Cash, which is generally all of the cash receipts of the Partnership
less all cash disbursements, with a targeted Minimum Quarterly Distribution
("MQD") of $0.55 per Unit, or $2.20 per Unit on an annualized basis. In
connection with the Petro transaction, the Partnership will increase the MQD to
$.575 per unit or $2.30 per Unit on an annualized basis. This increase in the
MQD reflects the expectation that the transaction will be accretive to the
Partnership. The increase in the MQD will also serve to raise the threshold
needed to end the subordination period.
Of the 3.6 million subordinated Partnership units anticipated to be distributed
to Petro shareholders, 2.8 million will be Senior Subordinated Units and
approximately 857,000 will be Junior Subordinated Units and General Partnership
Interests. The Senior
<PAGE>
Subordinated Units will be publicly registered and tradable (they are expected
to be listed on the NYSE) and will be subordinated in distributions to Star's
Common Units. The Junior Subordinated Units and General Partnership Interests
will not be registered nor publicly tradable and will be subordinated to both
the Common Units and the Senior Subordinated Units. The Senior Subordinated
Units will be exchanged with holders of Petro's publicly traded Class A common
stock and the Junior Subordinated Units and General Partnership Interests will
be exchanged with individuals that currently own Petro's Class C common stock.
Certain holders of the Company's Class C Common Stock will also exchange their
shares of Senior Subordinated Units.
It is currently contemplated that 21,177,000 shares of Petro Common Stock will
be exchanged for 2,767,000 Star Senior Subordinated Units. 5,386,000 shares of
Petro common stock, held by certain individuals who currently own Petro Class C
common stock, including Irik P. Sevin, Chairman of Petro and Star and other
members of a group that currently controls Petro, will be exchanged for 579,000
Junior Subordinated Units and General Partnership Interests which are
economically equivalent to 279,000 Junior Subordinated Units.
Under the partnership subordination provision, distributions on Star Senior
Subordinated Units may be made only after distributions of Available Cash on
Common Units meet the MQD requirement. Distributions on Star Junior
Subordinated Units and to the General Partner may be made only after
distributions of Available Cash on Common Units and Senior Subordinated Units
meet the MQD requirement. The Subordination Period will extend until the
Partnership earns and pays its MQD for three years. In any event, as a
condition of this transaction, the Partnership agreement will be amended so that
no distribution will be paid on the Senior Subordinated Units, Junior
Subordinated Units, or to the General Partner except to the extent Available
Cash is earned from operations.
Like many other publicly traded master limited partnerships, the Partnerships
contains a provision which provides the General Partner with incentive
distributions in excess of certain targeted amounts. This provision will be
modified so that should there be any such incentive distributions, they will be
made pro rata to the Senior Subordinated Units and Junior Subordinated Units as
well as to the General Partner.
In connection with the Transaction, the Senior Subordinated Units, Junior
Subordinated Units and General Partnership Interests can earn, pro rata, 303,000
additional Senior Subordinated Units each year that Petro provides $.50 per unit
accretion to Star to a maximum of 909,000 additional Senior Subordinated Units.
-2-
<PAGE>
In connection with the transaction, Star intends to raise approximately $140
million through a public offering of Common Units and $120 million through a
public or private offering of debt securities. The net proceeds from these
offerings will be used primarily to redeem approximately $240 million in Petro
public and private debt and preferred stock. Any such offering will be made
only by means of a prospectus or in transactions not requiring registration
under securities laws. This announcement does not constitute an offer to sell
any securities. As part of this recapitalization, Petro also intends to
restructure $66.2 million of privately held notes.
Petro has reached an agreement with institutional holders of an aggregate of
$149 million or 63.1% of such public debt and preferred stock to permit there
redemption of such securities at the closing of the Star Gas/Petro Transaction.
This agreement allows Petro to redeem its 9 3/8% Subordinated Debentures, 10
1/8% Subordinated Notes and 12 1/4% Subordinated Debentures at 100%, 100% and
103.5% of principal amount, respectively, and to redeem its 12 7/8% Preferred
Stock at $23 per share. In consideration for this early redemption right, Petro
has agreed to issue to such holders 3.37 shares of newly issued Petro Junior
Convertible Preferred Stock for each $1,000 in principal amount or liquidation
preference of such securities. Each share of Petro Junior Convertible Preferred
Stock will be exchangeable into .13 of a Star common Unit at the conclusion of
this transaction representing a maximum 104,000 MLP units. Should the
transaction not be consummated, the Junior Preferred Stock will be converted
into a like number of shares of Class A Common Stock.
Petro will offer to the remaining holders of it's publicly traded debt and
preferred stock the same right of early redemption under the same terms and
conditions as agreed to by the consenting holders. This proposal will be made
through an exchange offer that is expected to commence shortly. This
transaction and the associated Petro recapitalization are subject to receiving
an agreement to the early redemption from at least 90% of the outstanding
publicly traded debt and preferred stock.
Petro currently has a 40.7% equity interest in the Partnership and a subsidiary
of Petro is its general partner. After completion of the transaction, the Petro
shareholders will own approximately 26% of Star's equity through Subordinated
Units and General Partnership Interests. The holders of the Partnership's
Common Units (including an estimated 6.4 million Common Units that will be sold
in the Partnerships $140 million public offering) will own an aggregate
approximately 74% equity interest in the Partnership following the completion of
the transaction. The General Partner of the Partnership will be a newly
organized Delaware limited liability company that will be owned by members of
Petro's current group.
-3-
<PAGE>
In commenting on the proposed transaction, Joseph Cavanaugh, President of Star,
"We believe that this strategic combination will have a number of benefits for
the Partnership. Firstly, we are pleased with having achieved our goal of
structuring a transaction which we believe will be immediately accretive,
enabling us to increase the Partnership's MQD to $2.30 annually. Secondly, we
believe this strategic combination will provide an additional source of
attractive acquisition opportunities. Petro is the largest retail heating oil
company in the country and the primary consolidator of that highly fragmented
industry. Over the past nineteen years Petro has acquired 189 distributorships.
As such, we believe this combination should provide the Partnership with a
platform to increase its acquisition activities. Thirdly, over the past two and
one-half years, in an effort to take advantage of its size, Petro has
regionalized its operations, accessed developments in computer an and
communication technology, and entered into cross-marketing partnerships. These
programs have provided attractive productivity, operational and marketing
results which should continue to benefit the Partnership. Finally, this
combination significantly increases the size and market capitalization of the
Partnership."
Irik P. Sevin, CEO of Petro stated, "We believe the proposed transaction will
enable Petro to achieve its stated objective of accessing equity to recapitalize
and delever. This should permit us to continue our historically active
acquisition program and facilitate the funding of our operational and marketing
initiatives. In addition, the MLP structure should provide a better valuation
format for Petro which is cash flow oriented and which has been the only
publicly traded company in its industry. The transaction should provide our
shareholders with the resumption of annual cash distributions which Petro had
historically made."
The Board of Directors of Star has appointed an independent committee of
directors to represent Star Gas in this matter. This committee has retained
A.G. Edwards & Sons, Inc. to act as it financial advisor and to determine the
fairness of this transaction to the Star Common Unit holders. The Board of
Directors of Petro has retained PaineWebber Incorporated as its financial
advisor and Dain Rauscher Wessels to render an opinion as to the fairness to
Petro of this transaction.
The completion of the Transaction is subject to the negotiation and execution of
definitive agreements, the receipt of regulatory approvals, the approval of
Star's nonaffiliated common unit holders and Petro's nonaffiliated common
shareholders, other necessary partnership and corporate approvals, fairness
opinions from A.G. Edwards & Sons, Inc. and Dain Rauscher Wessels, and the
agreement to early redemption by the holders of 90% of Petro's
-4-
<PAGE>
publicly traded debt and preferred stock.
Petro and Star will continue to operate as separate business units and this
transaction will not have an impact on the day-to-day operations of either
entity. There will be no reduction in the number of employees as a result of
this transaction.
Petroleum Heat and Power Co., Inc. is the largest retail distributor of home
heating oil in the nation, serving approximately 350,000 customers in the
Northeast and Mid-Atlantic states, including the metropolitan areas of New York,
Boston, Washington, D.C., Baltimore, and Providence. Star Gas Partners L.P.,
the eighth largest retail propane distributor serves more than 166,000 customers
throughout 74 locations in the Northeast, from Maine to Southern New Jersey.
Star operates under several trademarks and trade names, including: Star Gas
Service, Silgas, Blue Flame L.P. Gas, Maingas, Arrow Gas, Mid-Hudson Valley
Propane, Coleman Gas Service, H&S Gas, Wilhoyte L.P. Gas, Rural Natural Gas,
Pearl Gas, Bay State-Arrow Gas, Knowles L.P. Gas and Lowe Bros. & Dad.
This Press Release includes "forward-looking statements," within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act, which
represent Petro and Star's expectations or beliefs concerning future events that
involve risks and uncertainties. Although Petro and Star Gas believe that the
expectations reflected in such forward-looking statements are reasonable, Petro
and Star Gas can give no assurance that such expectations will prove to have
been correct. Investors and prospective investors should read this Press
Release in conjunction with Petro and Star Gas' Forms 10-K and 10-Q which
include additional information that could affect Petro and Star Gas' financial
results.
-5-
